Cheniere Energy, Inc. - Quarter Report: 2019 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-16383
![colorlogoonwhitecmyka41.gif](https://www.sec.gov/Archives/edgar/data/0000003570/000000357019000089/colorlogoonwhitecmyka41.gif)
CHENIERE ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware | 95-4352386 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
700 Milam Street, Suite 1900
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 375-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, $ 0.003 par value | LNG | NYSE American |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 25, 2019, the issuer had 254,750,996 shares of Common Stock outstanding.
CHENIERE ENERGY, INC.
TABLE OF CONTENTS
i
DEFINITIONS
As used in this quarterly report, the terms listed below have the following meanings:
Common Industry and Other Terms
Bcf | billion cubic feet | |
Bcf/d | billion cubic feet per day | |
Bcf/yr | billion cubic feet per year | |
Bcfe | billion cubic feet equivalent | |
DOE | U.S. Department of Energy | |
EPC | engineering, procurement and construction | |
FERC | Federal Energy Regulatory Commission | |
FTA countries | countries with which the United States has a free trade agreement providing for national treatment for trade in natural gas | |
GAAP | generally accepted accounting principles in the United States | |
Henry Hub | the final settlement price (in USD per MMBtu) for the New York Mercantile Exchange’s Henry Hub natural gas futures contract for the month in which a relevant cargo’s delivery window is scheduled to begin | |
LIBOR | London Interbank Offered Rate | |
LNG | liquefied natural gas, a product of natural gas that, through a refrigeration process, has been cooled to a liquid state, which occupies a volume that is approximately 1/600th of its gaseous state | |
MMBtu | million British thermal units, an energy unit | |
mtpa | million tonnes per annum | |
non-FTA countries | countries with which the United States does not have a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted | |
SEC | U.S. Securities and Exchange Commission | |
SPA | LNG sale and purchase agreement | |
TBtu | trillion British thermal units, an energy unit | |
Train | an industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG | |
TUA | terminal use agreement |
1
Abbreviated Legal Entity Structure
The following diagram depicts our abbreviated legal entity structure as of September 30, 2019, including our ownership of certain subsidiaries, and the references to these entities used in this quarterly report:
![ceiorgchart63019a01.gif](https://www.sec.gov/Archives/edgar/data/0000003570/000000357019000089/ceiorgchart63019a01.gif)
Unless the context requires otherwise, references to “Cheniere,” the “Company,” “we,” “us” and “our” refer to Cheniere Energy, Inc. and its consolidated subsidiaries, including our publicly traded subsidiary, Cheniere Partners.
Unless the context requires otherwise, references to the “CCH Group” refer to CCH HoldCo II, CCH HoldCo I, CCH, CCL and CCP, collectively.
2
PART I. | FINANCIAL INFORMATION |
ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS |
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (1)
(in millions, except share data)
September 30, | December 31, | ||||||
2019 | 2018 | ||||||
ASSETS | (unaudited) | ||||||
Current assets | |||||||
Cash and cash equivalents | $ | 2,539 | $ | 981 | |||
Restricted cash | 578 | 2,175 | |||||
Accounts and other receivables | 507 | 585 | |||||
Inventory | 288 | 316 | |||||
Derivative assets | 140 | 63 | |||||
Other current assets | 133 | 114 | |||||
Total current assets | 4,185 | 4,234 | |||||
Property, plant and equipment, net | 29,490 | 27,245 | |||||
Operating lease assets, net | 493 | — | |||||
Debt issuance costs, net | 50 | 72 | |||||
Non-current derivative assets | 123 | 54 | |||||
Goodwill | 77 | 77 | |||||
Other non-current assets, net | 287 | 305 | |||||
Total assets | $ | 34,705 | $ | 31,987 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities | |||||||
Accounts payable | $ | 50 | $ | 58 | |||
Accrued liabilities | 1,199 | 1,169 | |||||
Current debt | 11 | 239 | |||||
Deferred revenue | 171 | 139 | |||||
Current operating lease liabilities | 275 | — | |||||
Derivative liabilities | 181 | 128 | |||||
Other current liabilities | 5 | 9 | |||||
Total current liabilities | 1,892 | 1,742 | |||||
Long-term debt, net | 30,795 | 28,179 | |||||
Non-current operating lease liabilities | 203 | — | |||||
Non-current finance lease liabilities | 58 | 57 | |||||
Non-current derivative liabilities | 245 | 22 | |||||
Other non-current liabilities | 26 | 58 | |||||
Commitments and contingencies (see Note 17) | |||||||
Stockholders’ equity | |||||||
Preferred stock, $0.0001 par value, 5.0 million shares authorized, none issued | — | — | |||||
Common stock, $0.003 par value, 480.0 million shares authorized | |||||||
Issued: 270.6 million shares at September 30, 2019 and 269.8 million shares at December 31, 2018 | |||||||
Outstanding: 255.0 million shares at September 30, 2019 and 257.0 million shares at December 31, 2018 | 1 | 1 | |||||
Treasury stock: 15.6 million shares and 12.8 million shares at September 30, 2019 and December 31, 2018, respectively, at cost | (584 | ) | (406 | ) | |||
Additional paid-in-capital | 4,130 | 4,035 | |||||
Accumulated deficit | (4,447 | ) | (4,156 | ) | |||
Total stockholders’ deficit | (900 | ) | (526 | ) | |||
Non-controlling interest | 2,386 | 2,455 | |||||
Total equity | 1,486 | 1,929 | |||||
Total liabilities and equity | $ | 34,705 | $ | 31,987 |
(1) | Amounts presented include balances held by our consolidated variable interest entity (“VIE”), Cheniere Partners, as further discussed in Note 8— Non-controlling Interest and Variable Interest Entity. As of September 30, 2019, total assets and liabilities of Cheniere Partners, which are included in our Consolidated Balance Sheets, were $19.0 billion and $18.6 billion, respectively, including $1.7 billion of cash and cash equivalents and $0.2 billion of restricted cash. |
The accompanying notes are an integral part of these consolidated financial statements.
3
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues | |||||||||||||||
LNG revenues | $ | 2,059 | $ | 1,719 | $ | 6,375 | $ | 5,327 | |||||||
Regasification revenues | 66 | 66 | 199 | 196 | |||||||||||
Other revenues | 45 | 34 | 149 | 81 | |||||||||||
Total revenues | 2,170 | 1,819 | 6,723 | 5,604 | |||||||||||
Operating costs and expenses | |||||||||||||||
Cost of sales (excluding depreciation and amortization expense shown separately below) | 1,267 | 1,027 | 3,758 | 3,078 | |||||||||||
Operating and maintenance expense | 308 | 170 | 824 | 457 | |||||||||||
Development expense | 2 | 2 | 6 | 6 | |||||||||||
Selling, general and administrative expense | 72 | 74 | 222 | 214 | |||||||||||
Depreciation and amortization expense | 213 | 113 | 561 | 333 | |||||||||||
Impairment expense and loss on disposal of assets | 1 | 8 | 7 | 8 | |||||||||||
Total operating costs and expenses | 1,863 | 1,394 | 5,378 | 4,096 | |||||||||||
Income from operations | 307 | 425 | 1,345 | 1,508 | |||||||||||
Other income (expense) | |||||||||||||||
Interest expense, net of capitalized interest | (395 | ) | (221 | ) | (1,014 | ) | (653 | ) | |||||||
Loss on modification or extinguishment of debt | (27 | ) | (12 | ) | (27 | ) | (27 | ) | |||||||
Derivative gain (loss), net | (78 | ) | 23 | (187 | ) | 132 | |||||||||
Other income (expense) | (70 | ) | 15 | (38 | ) | 32 | |||||||||
Total other expense | (570 | ) | (195 | ) | (1,266 | ) | (516 | ) | |||||||
Income (loss) before income taxes and non-controlling interest | (263 | ) | 230 | 79 | 992 | ||||||||||
Income tax benefit (provision) | 3 | (3 | ) | — | (15 | ) | |||||||||
Net income (loss) | (260 | ) | 227 | 79 | 977 | ||||||||||
Less: net income attributable to non-controlling interest | 58 | 162 | 370 | 573 | |||||||||||
Net income (loss) attributable to common stockholders | $ | (318 | ) | $ | 65 | $ | (291 | ) | $ | 404 | |||||
Net income (loss) per share attributable to common stockholders—basic (1) | $ | (1.25 | ) | $ | 0.26 | $ | (1.13 | ) | $ | 1.67 | |||||
Net income (loss) per share attributable to common stockholders—diluted (1) | $ | (1.25 | ) | $ | 0.26 | $ | (1.13 | ) | $ | 1.65 | |||||
Weighted average number of common shares outstanding—basic | 256.0 | 247.2 | 256.8 | 241.9 | |||||||||||
Weighted average number of common shares outstanding—diluted | 256.0 | 250.2 | 256.8 | 244.6 |
(1) Earnings per share in the table may not recalculate exactly due to rounding because it is calculated based on whole numbers, not the rounded numbers presented.
The accompanying notes are an integral part of these consolidated financial statements.
4
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
(unaudited)
Three and Nine Months Ended September 30, 2019 | |||||||||||||||||||||||||||||
Total Stockholders’ Equity | |||||||||||||||||||||||||||||
Common Stock | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Non-controlling Interest | Total Equity | ||||||||||||||||||||||||
Shares | Par Value Amount | Shares | Amount | ||||||||||||||||||||||||||
Balance at December 31, 2018 | 257.0 | $ | 1 | 12.8 | $ | (406 | ) | $ | 4,035 | $ | (4,156 | ) | $ | 2,455 | $ | 1,929 | |||||||||||||
Vesting of restricted stock units | 0.6 | — | — | — | — | — | — | — | |||||||||||||||||||||
Share-based compensation | — | — | — | — | 28 | — | — | 28 | |||||||||||||||||||||
Shares withheld from employees related to share-based compensation, at cost | (0.2 | ) | — | 0.2 | (12 | ) | — | — | — | (12 | ) | ||||||||||||||||||
Net income attributable to non-controlling interest | — | — | — | — | — | — | 196 | 196 | |||||||||||||||||||||
Distributions and dividends to non-controlling interest | — | — | — | — | — | — | (144 | ) | (144 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 141 | — | 141 | |||||||||||||||||||||
Balance at March 31, 2019 | 257.4 | 1 | 13.0 | (418 | ) | 4,063 | (4,015 | ) | 2,507 | 2,138 | |||||||||||||||||||
Vesting of restricted stock units | 0.1 | — | — | — | — | — | — | — | |||||||||||||||||||||
Share-based compensation | — | — | — | — | 33 | — | — | 33 | |||||||||||||||||||||
Shares withheld from employees related to share-based compensation, at cost | — | — | — | (2 | ) | — | — | — | (2 | ) | |||||||||||||||||||
Shares repurchased, at cost | — | — | — | (3 | ) | — | — | — | (3 | ) | |||||||||||||||||||
Net income attributable to non-controlling interest | — | — | — | — | — | — | 116 | 116 | |||||||||||||||||||||
Equity portion of convertible notes, net | — | — | — | — | 1 | — | — | 1 | |||||||||||||||||||||
Distributions and dividends to non-controlling interest | — | — | — | — | — | — | (146 | ) | (146 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (114 | ) | — | (114 | ) | |||||||||||||||||||
Balance at June 30, 2019 | 257.5 | 1 | 13.0 | (423 | ) | 4,097 | (4,129 | ) | 2,477 | 2,023 | |||||||||||||||||||
Vesting of restricted stock units | 0.1 | — | — | — | — | — | — | — | |||||||||||||||||||||
Share-based compensation | — | — | — | — | 33 | — | — | 33 | |||||||||||||||||||||
Shares withheld from employees related to share-based compensation, at cost | (0.1 | ) | — | 0.1 | (5 | ) | — | — | — | (5 | ) | ||||||||||||||||||
Shares repurchased, at cost | (2.5 | ) | — | 2.5 | (156 | ) | — | — | — | (156 | ) | ||||||||||||||||||
Net income attributable to non-controlling interest | — | — | — | — | — | — | 58 | 58 | |||||||||||||||||||||
Distributions and dividends to non-controlling interest | — | — | — | — | — | — | (149 | ) | (149 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (318 | ) | — | (318 | ) | |||||||||||||||||||
Balance at September 30, 2019 | 255.0 | $ | 1 | 15.6 | $ | (584 | ) | $ | 4,130 | $ | (4,447 | ) | $ | 2,386 | $ | 1,486 |
The accompanying notes are an integral part of these consolidated financial statements.
5
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—CONTINUED
(in millions)
(unaudited)
Three and Nine Months Ended September 30, 2018 | |||||||||||||||||||||||||||||
Total Stockholders’ Equity | |||||||||||||||||||||||||||||
Common Stock | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Non-controlling Interest | Total Equity | ||||||||||||||||||||||||
Shares | Par Value Amount | Shares | Amount | ||||||||||||||||||||||||||
Balance at December 31, 2017 | 237.6 | $ | 1 | 12.5 | $ | (386 | ) | $ | 3,248 | $ | (4,627 | ) | $ | 3,004 | $ | 1,240 | |||||||||||||
Vesting of restricted stock units | 0.3 | — | — | — | — | — | — | — | |||||||||||||||||||||
Share-based compensation | — | — | — | — | 16 | — | — | 16 | |||||||||||||||||||||
Shares withheld from employees related to share-based compensation, at cost | — | — | 0.1 | (6 | ) | — | — | — | (6 | ) | |||||||||||||||||||
Net income attributable to non-controlling interest | — | — | — | — | — | — | 243 | 243 | |||||||||||||||||||||
Distributions and dividends to non-controlling interest | — | — | — | — | — | — | (143 | ) | (143 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 357 | — | 357 | |||||||||||||||||||||
Balance at March 31, 2018 | 237.9 | 1 | 12.6 | (392 | ) | 3,264 | (4,270 | ) | 3,104 | 1,707 | |||||||||||||||||||
Issuance of stock to acquire additional interest in Cheniere Holdings | 10.3 | — | — | — | 376 | — | (376 | ) | — | ||||||||||||||||||||
Share-based compensation | — | — | — | — | 23 | — | — | 23 | |||||||||||||||||||||
Shares withheld from employees related to share-based compensation, at cost | (0.1 | ) | — | — | (2 | ) | — | — | — | (2 | ) | ||||||||||||||||||
Net income attributable to non-controlling interest | — | — | — | — | — | — | 168 | 168 | |||||||||||||||||||||
Equity portion of convertible notes, net | — | — | — | — | 1 | — | — | 1 | |||||||||||||||||||||
Distributions and dividends to non-controlling interest | — | — | — | — | — | — | (145 | ) | (145 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (18 | ) | — | (18 | ) | |||||||||||||||||||
Balance at June 30, 2018 | 248.1 | 1 | 12.6 | (394 | ) | 3,664 | (4,288 | ) | 2,751 | 1,734 | |||||||||||||||||||
Vesting of restricted stock units | 0.1 | — | — | — | — | — | — | — | |||||||||||||||||||||
Issuance of stock to acquire additional interest in Cheniere Holdings | 8.9 | — | — | — | 318 | — | (326 | ) | (8 | ) | |||||||||||||||||||
Share-based compensation | — | — | — | — | 26 | — | — | 26 | |||||||||||||||||||||
Shares withheld from employees related to share-based compensation, at cost | — | — | — | (2 | ) | — | — | — | (2 | ) | |||||||||||||||||||
Net income attributable to non-controlling interest | — | — | — | — | — | — | 162 | 162 | |||||||||||||||||||||
Equity portion of convertible notes, net | — | — | — | — | 1 | — | — | 1 | |||||||||||||||||||||
Distributions and dividends to non-controlling interest | — | — | — | — | — | — | (147 | ) | (147 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 65 | — | 65 | |||||||||||||||||||||
Balance at September 30, 2018 | 257.1 | $ | 1 | 12.6 | $ | (396 | ) | $ | 4,009 | $ | (4,223 | ) | $ | 2,440 | $ | 1,831 |
The accompanying notes are an integral part of these consolidated financial statements.
6
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Nine Months Ended September 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 79 | $ | 977 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization expense | 561 | 333 | |||||
Share-based compensation expense | 94 | 89 | |||||
Non-cash interest expense | 122 | 52 | |||||
Amortization of debt issuance costs, deferred commitment fees, premium and discount | 71 | 53 | |||||
Non-cash operating lease costs | 251 | — | |||||
Loss on modification or extinguishment of debt | 27 | 27 | |||||
Total losses on derivatives, net | 22 | 17 | |||||
Net cash provided by (used for) settlement of derivative instruments | 108 | (54 | ) | ||||
Impairment expense and loss on disposal of assets | 7 | 8 | |||||
Loss on equity method investments | 88 | — | |||||
Other | (2 | ) | (5 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts and other receivables | (5 | ) | 114 | ||||
Inventory | 35 | (56 | ) | ||||
Other current assets | (45 | ) | (35 | ) | |||
Accounts payable and accrued liabilities | (82 | ) | (23 | ) | |||
Deferred revenue | 33 | 8 | |||||
Operating lease liabilities | (263 | ) | — | ||||
Finance lease liabilities | 1 | — | |||||
Other, net | (10 | ) | (1 | ) | |||
Net cash provided by operating activities | 1,092 | 1,504 | |||||
Cash flows from investing activities | |||||||
Property, plant and equipment, net | (2,587 | ) | (2,712 | ) | |||
Investment in equity method investment | (70 | ) | (25 | ) | |||
Other | (1 | ) | 15 | ||||
Net cash used in investing activities | (2,658 | ) | (2,722 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from issuances of debt | 4,420 | 3,443 | |||||
Repayments of debt | (2,237 | ) | (1,385 | ) | |||
Debt issuance and deferred financing costs | (38 | ) | (53 | ) | |||
Debt extinguishment costs | (4 | ) | (16 | ) | |||
Distributions and dividends to non-controlling interest | (439 | ) | (435 | ) | |||
Payments related to tax withholdings for share-based compensation | (19 | ) | (10 | ) | |||
Repurchase of common stock | (159 | ) | — | ||||
Other | 3 | (7 | ) | ||||
Net cash provided by financing activities | 1,527 | 1,537 | |||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (39 | ) | 319 | ||||
Cash, cash equivalents and restricted cash—beginning of period | 3,156 | 2,613 | |||||
Cash, cash equivalents and restricted cash—end of period | $ | 3,117 | $ | 2,932 |
Balances per Consolidated Balance Sheet:
September 30, 2019 | |||
Cash and cash equivalents | $ | 2,539 | |
Restricted cash | 578 | ||
Total cash, cash equivalents and restricted cash | $ | 3,117 |
The accompanying notes are an integral part of these consolidated financial statements.
7
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION
We are operating and constructing two natural gas liquefaction and export facilities at Sabine Pass and Corpus Christi. The Sabine Pass LNG terminal is located in Cameron Parish, Louisiana, on the Sabine-Neches Waterway less than four miles from the Gulf Coast. Cheniere Partners, through its subsidiary SPL, is operating and constructing six natural gas liquefaction Trains (the “SPL Project”) at the Sabine Pass LNG terminal adjacent to the existing regasification facilities. Trains 1 through 5 are operational and Train 6 is under construction. The Sabine Pass LNG terminal has operational regasification facilities owned by Cheniere Partners’ wholly owned subsidiary, SPLNG, and a 94-mile pipeline owned by Cheniere Partners’ wholly owned subsidiary, CTPL, that interconnects the Sabine Pass LNG terminal with a number of large interstate pipelines.
The Corpus Christi LNG terminal is located near Corpus Christi, Texas and is operated and constructed by our wholly owned subsidiary CCL. We also operate a 23-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the liquefaction facilities, the “CCL Project”) through our wholly owned subsidiary CCP. The CCL Project is being constructed in stages with the first phase being three Trains (“Phase 1”). The first stage includes Trains 1 and 2, two LNG storage tanks, one complete marine berth and a second partial berth and all of the CCL Project’s necessary infrastructure facilities (“Stage 1”). The second stage includes Train 3, one LNG storage tank and the completion of the second partial berth (“Stage 2”). Trains 1 and 2 are operational and Train 3 is under construction.
Additionally, separate from the CCH Group, we are developing an expansion of the Corpus Christi LNG terminal adjacent to the CCL Project (“Corpus Christi Stage 3”) and filed an application with FERC in June 2018 for seven midscale Trains with an expected aggregate nominal production capacity of approximately 9.5 mtpa and one LNG storage tank.
We remain focused on expansion of our existing sites by leveraging existing infrastructure. We continue to consider development of other projects, including infrastructure projects in support of natural gas supply and LNG demand, which, among other things, will require acceptable commercial and financing arrangements before we make a final investment decision (“FID”).
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of Cheniere have been prepared in accordance with GAAP for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our annual report on Form 10-K for the year ended December 31, 2018. In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation, have been included.
Results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2019.
Recent Accounting Standards
We adopted ASU 2016-02, Leases (Topic 842), and subsequent amendments thereto (“ASC 842”) on January 1, 2019 using the optional transition approach to apply the standard at the beginning of the first quarter of 2019 with no retrospective adjustments to prior periods. The adoption of the standard resulted in the recognition of right-of-use assets and lease liabilities for operating leases of approximately $550 million on our Consolidated Balance Sheets, with no material impact on our Consolidated Statements of Operations or Consolidated Statements of Cash Flows. We have elected the practical expedients to (1) carryforward prior conclusions related to lease identification and classification for existing leases, (2) combine lease and non-lease components of an arrangement for all classes of leased assets, (3) omit short-term leases with a term of 12 months or less from recognition on the balance sheet and (4) carryforward our existing accounting for land easements not previously accounted for as leases. See Note 11—Leases for additional information on our leases following the adoption of this standard.
8
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 2—RESTRICTED CASH
Restricted cash consists of funds that are contractually or legally restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on our Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, restricted cash consisted of the following (in millions):
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Current restricted cash | ||||||||
SPL Project | $ | 185 | $ | 756 | ||||
Cheniere Partners and cash held by guarantor subsidiaries | — | 785 | ||||||
CCL Project | 132 | 289 | ||||||
Cash held by our subsidiaries restricted to Cheniere | 261 | 345 | ||||||
Total current restricted cash | $ | 578 | $ | 2,175 |
Pursuant to the accounts agreements entered into with the collateral trustees for the benefit of SPL’s debt holders and CCH’s debt holders, SPL and CCH are required to deposit all cash received into reserve accounts controlled by the collateral trustees. The usage or withdrawal of such cash is restricted to the payment of liabilities related to the SPL Project and the CCL Project (collectively, the “Liquefaction Projects”) and other restricted payments.
The cash held by Cheniere Partners and its guarantor subsidiaries was restricted in use under the terms of the previous $2.8 billion credit facilities (the “2016 CQP Credit Facilities”) and the related depositary agreement governing the extension of credit to Cheniere Partners, but is no longer restricted following the termination of the 2016 CQP Credit Facilities.
NOTE 3—ACCOUNTS AND OTHER RECEIVABLES
As of September 30, 2019 and December 31, 2018, accounts and other receivables consisted of the following (in millions):
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Trade receivables | ||||||||
SPL and CCL | $ | 285 | $ | 330 | ||||
Cheniere Marketing | 173 | 205 | ||||||
Other accounts receivable | 49 | 50 | ||||||
Total accounts and other receivables | $ | 507 | $ | 585 |
NOTE 4—INVENTORY
As of September 30, 2019 and December 31, 2018, inventory consisted of the following (in millions):
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Natural gas | $ | 20 | $ | 30 | ||||
LNG | 51 | 24 | ||||||
LNG in-transit | 83 | 173 | ||||||
Materials and other | 134 | 89 | ||||||
Total inventory | $ | 288 | $ | 316 |
9
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 5—PROPERTY, PLANT AND EQUIPMENT
As of September 30, 2019 and December 31, 2018, property, plant and equipment, net consisted of the following (in millions):
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
LNG terminal costs | ||||||||
LNG terminal and interconnecting pipeline facilities | $ | 27,224 | $ | 13,386 | ||||
LNG site and related costs | 322 | 86 | ||||||
LNG terminal construction-in-process | 3,576 | 14,864 | ||||||
Accumulated depreciation | (1,827 | ) | (1,299 | ) | ||||
Total LNG terminal costs, net | 29,295 | 27,037 | ||||||
Fixed assets and other | ||||||||
Computer and office equipment | 23 | 17 | ||||||
Furniture and fixtures | 22 | 22 | ||||||
Computer software | 106 | 100 | ||||||
Leasehold improvements | 42 | 41 | ||||||
Land | 59 | 59 | ||||||
Other | 20 | 21 | ||||||
Accumulated depreciation | (134 | ) | (111 | ) | ||||
Total fixed assets and other, net | 138 | 149 | ||||||
Assets under finance lease | ||||||||
Tug vessels | 60 | 60 | ||||||
Accumulated depreciation | (3 | ) | (1 | ) | ||||
Total assets under finance lease, net | 57 | 59 | ||||||
Property, plant and equipment, net | $ | 29,490 | $ | 27,245 |
Depreciation expense was $211 million and $112 million during the three months ended September 30, 2019 and 2018, respectively, and $557 million and $331 million during the nine months ended September 30, 2019 and 2018, respectively.
We realize offsets to LNG terminal costs for sales of commissioning cargoes that were earned or loaded prior to the start of commercial operations of the respective Train during the testing phase for its construction. We realized offsets to LNG terminal costs of $99 million and $301 million during the three and nine months ended September 30, 2019, respectively, for sales of commissioning cargoes from the Liquefaction Projects. We did not realize any offsets to LNG terminal costs during the three and nine months ended September 30, 2018.
NOTE 6—DERIVATIVE INSTRUMENTS
We have entered into the following derivative instruments that are reported at fair value:
• | interest rate swaps to hedge the exposure to volatility in a portion of the floating-rate interest payments under CCH’s credit facilities (“CCH Interest Rate Derivatives”) and to hedge against changes in interest rates that could impact anticipated future issuance of debt by CCH (“CCH Interest Rate Forward Start Derivatives”); |
• | commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the SPL Project, CCL Project and potential future development of Corpus Christi Stage 3 (“Physical Liquefaction Supply Derivatives”) and associated economic hedges (collectively, the “Liquefaction Supply Derivatives”); |
• | financial derivatives to hedge the exposure to the commodity markets in which we have contractual arrangements to purchase or sell physical LNG (“LNG Trading Derivatives”); and |
• | foreign currency exchange (“FX”) contracts to hedge exposure to currency risk associated with both LNG Trading Derivatives and operations in countries outside of the United States (“FX Derivatives”). |
We recognize our derivative instruments as either assets or liabilities and measure those instruments at fair value. None of our derivative instruments are designated as cash flow or fair value hedging instruments, and changes in fair value are recorded within our Consolidated Statements of Operations to the extent not utilized for the commissioning process.
10
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018, which are classified as derivative assets, non-current derivative assets, derivative liabilities or non-current derivative liabilities in our Consolidated Balance Sheets (in millions):
Fair Value Measurements as of | |||||||||||||||||||||||||||||||
September 30, 2019 | December 31, 2018 | ||||||||||||||||||||||||||||||
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||||||
CCH Interest Rate Derivatives asset (liability) | $ | — | $ | (104 | ) | $ | — | $ | (104 | ) | $ | — | $ | 18 | $ | — | $ | 18 | |||||||||||||
CCH Interest Rate Forward Start Derivatives liability | — | (68 | ) | — | (68 | ) | — | — | — | — | |||||||||||||||||||||
Liquefaction Supply Derivatives asset (liability) | (11 | ) | (10 | ) | (31 | ) | (52 | ) | 6 | (19 | ) | (29 | ) | (42 | ) | ||||||||||||||||
LNG Trading Derivatives asset (liability) | (8 | ) | 32 | — | 24 | 1 | (25 | ) | — | (24 | ) | ||||||||||||||||||||
FX Derivatives asset | — | 37 | — | 37 | — | 15 | — | 15 |
We value our CCH Interest Rate Derivatives and CCH Interest Rate Forward Start Derivatives using an income-based approach utilizing observable inputs to the valuation model including interest rate curves, risk adjusted discount rates, credit spreads and other relevant data. We value our LNG Trading Derivatives and our Liquefaction Supply Derivatives using a market or option-based approach incorporating present value techniques, as needed, using observable commodity price curves, when available, and other relevant data. We value our FX Derivatives with a market approach using observable FX rates and other relevant data.
The fair value of our Physical Liquefaction Supply Derivatives is predominantly driven by observable and unobservable market commodity prices and, as applicable to our natural gas supply contracts, our assessment of the associated events deriving fair value, including evaluating whether the respective market is available as pipeline infrastructure is developed. The fair value of our Physical Liquefaction Supply Derivatives incorporates risk premiums related to the satisfaction of conditions precedent, such as completion and placement into service of relevant pipeline infrastructure to accommodate marketable physical gas flow. As of September 30, 2019 and December 31, 2018, some of our Physical Liquefaction Supply Derivatives existed within markets for which the pipeline infrastructure was under development to accommodate marketable physical gas flow.
We include a portion of our Physical Liquefaction Supply Derivatives as Level 3 within the valuation hierarchy as the fair value is developed through the use of internal models which incorporate significant unobservable inputs. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks, such as future prices of energy units for unobservable periods, liquidity, volatility and contract duration.
The Level 3 fair value measurements of natural gas positions within our Physical Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas and international LNG prices. The following table includes quantitative information for the unobservable inputs for our Level 3 Physical Liquefaction Supply Derivatives as of September 30, 2019:
Net Fair Value Liability (in millions) | Valuation Approach | Significant Unobservable Input | Significant Unobservable Inputs Range | |||||
Physical Liquefaction Supply Derivatives | $(31) | Market approach incorporating present value techniques | Henry Hub basis spread | $(0.708) - $0.056 | ||||
Option pricing model | International LNG pricing spread, relative to Henry Hub (1) | 105% - 199% |
(1) Spread contemplates U.S. dollar-denominated pricing.
11
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Increases or decreases in basis or pricing spreads, in isolation, would decrease or increase, respectively, the fair value of our Physical Liquefaction Supply Derivatives.
The following table shows the changes in the fair value of our Level 3 Physical Liquefaction Supply Derivatives during the three and nine months ended September 30, 2019 and 2018 (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Balance, beginning of period | $ | 89 | $ | 12 | $ | (29 | ) | $ | 43 | |||||||
Realized and mark-to-market gains (losses): | ||||||||||||||||
Included in cost of sales | (137 | ) | 5 | (139 | ) | (4 | ) | |||||||||
Purchases and settlements: | ||||||||||||||||
Purchases | 17 | 9 | 93 | 14 | ||||||||||||
Settlements | — | 1 | 44 | (27 | ) | |||||||||||
Transfers out of Level 3 (1) | — | (1 | ) | — | — | |||||||||||
Balance, end of period | $ | (31 | ) | $ | 26 | $ | (31 | ) | $ | 26 | ||||||
Change in unrealized gains (losses) relating to instruments still held at end of period | $ | (137 | ) | $ | 5 | $ | (139 | ) | $ | (4 | ) |
(1) Transferred to Level 2 as a result of observable market for the underlying natural gas purchase agreements.
Derivative assets and liabilities arising from our derivative contracts with the same counterparty are reported on a net basis, as all counterparty derivative contracts provide for the unconditional right of set-off in the event of default. The use of derivative instruments exposes us to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments in instances when our derivative instruments are in an asset position. Additionally, counterparties are at risk that we will be unable to meet our commitments in instances where our derivative instruments are in a liability position. We incorporate both our own nonperformance risk and the respective counterparty’s nonperformance risk in fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, set-off rights and guarantees.
Interest Rate Derivatives
During the nine months ended September 30, 2019, there were no changes to the terms of the CCH Interest Rate Derivatives entered into by CCH to protect against volatility of future cash flows and hedge a portion of the variable interest payments on its credit facility (the “CCH Credit Facility”).
In June and July of 2019, we entered into CCH Interest Rate Forward Start Derivatives to hedge against changes in interest rates that could impact anticipated future issuance of debt by CCH, which is anticipated by the end of 2020.
Cheniere Partners previously had interest rate swaps (“CQP Interest Rate Derivatives” and, collectively with the CCH Interest Rate Derivatives and the CCH Interest Rate Forward Start Derivatives, the “Interest Rate Derivatives”) to hedge a portion of the variable interest payments on its credit facilities, which were terminated in October 2018.
As of September 30, 2019, we had the following Interest Rate Derivatives outstanding:
Initial Notional Amount | Maximum Notional Amount | Effective Date | Maturity Date | Weighted Average Fixed Interest Rate Paid | Variable Interest Rate Received | |||||||
CCH Interest Rate Derivatives | $29 million | $4.7 billion | May 20, 2015 | May 31, 2022 | 2.30% | One-month LIBOR | ||||||
CCH Interest Rate Forward Start Derivatives | $1.5 billion | $1.5 billion | June 30, 2020 | December 31, 2030 | 2.08% | Three-month LIBOR |
12
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table shows the fair value and location of the Interest Rate Derivatives on our Consolidated Balance Sheets (in millions):
September 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
CCH Interest Rate Derivatives | CCH Interest Rate Forward Start Derivatives | Total | CCH Interest Rate Derivatives | CCH Interest Rate Forward Start Derivatives | Total | ||||||||||||||||||
Consolidated Balance Sheet Location | |||||||||||||||||||||||
Derivative assets | $ | — | $ | — | $ | — | $ | 10 | $ | — | $ | 10 | |||||||||||
Non-current derivative assets | — | — | — | 8 | — | 8 | |||||||||||||||||
Total derivative assets | — | — | — | 18 | — | 18 | |||||||||||||||||
Derivative liabilities | (30 | ) | (46 | ) | (76 | ) | — | — | — | ||||||||||||||
Non-current derivative liabilities | (74 | ) | (22 | ) | (96 | ) | — | — | — | ||||||||||||||
Total derivative liabilities | (104 | ) | (68 | ) | (172 | ) | — | — | — | ||||||||||||||
Derivative asset (liability), net | $ | (104 | ) | $ | (68 | ) | $ | (172 | ) | $ | 18 | $ | — | $ | 18 |
The following table shows the changes in the fair value and settlements of our Interest Rate Derivatives recorded in derivative gain (loss), net on our Consolidated Statements of Operations during the three and nine months ended September 30, 2019 and 2018 (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
CCH Interest Rate Derivatives gain (loss) | $ | (17 | ) | $ | 21 | $ | (119 | ) | $ | 119 | ||||||
CCH Interest Rate Forward Start Derivatives loss | (61 | ) | — | (68 | ) | — | ||||||||||
CQP Interest Rate Derivatives gain | — | 2 | — | 13 |
Commodity Derivatives
SPL, CCL and CCL Stage III have entered into physical natural gas supply contracts and associated economic hedges to purchase natural gas for the commissioning and operation of the SPL Project, the CCL Project and potential future development of Corpus Christi Stage 3, respectively, which are primarily indexed to the natural gas market and international LNG indices. The terms of the index-based physical natural gas supply contracts range up to approximately 15 years, some of which commence upon the satisfaction of certain events or states of affairs.
We have entered into, and may from time to time enter into, financial LNG Trading Derivatives in the form of swaps, forwards, options or futures to economically hedge exposure to the commodity markets in which we have contractual arrangements to purchase or sell physical LNG. We have entered into LNG Trading Derivatives to secure a fixed price position to minimize future cash flow variability associated with LNG purchase and sale transactions.
13
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table shows the fair value and location of our Liquefaction Supply Derivatives and LNG Trading Derivatives (collectively, “Commodity Derivatives”) on our Consolidated Balance Sheets (in millions, except notional amount):
September 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Liquefaction Supply Derivatives (1) | LNG Trading Derivatives (2) | Total | Liquefaction Supply Derivatives (1) | LNG Trading Derivatives (2) | Total | ||||||||||||||||||
Consolidated Balance Sheet Location | |||||||||||||||||||||||
Derivative assets | $ | 27 | $ | 78 | $ | 105 | $ | 13 | $ | 24 | $ | 37 | |||||||||||
Non-current derivative assets | 120 | 1 | 121 | 46 | — | 46 | |||||||||||||||||
Total derivative assets | 147 | 79 | 226 | 59 | 24 | 83 | |||||||||||||||||
Derivative liabilities | (52 | ) | (53 | ) | (105 | ) | (79 | ) | (48 | ) | (127 | ) | |||||||||||
Non-current derivative liabilities | (147 | ) | (2 | ) | (149 | ) | (22 | ) | — | (22 | ) | ||||||||||||
Total derivative liabilities | (199 | ) | (55 | ) | (254 | ) | (101 | ) | (48 | ) | (149 | ) | |||||||||||
Derivative asset (liability), net | $ | (52 | ) | $ | 24 | $ | (28 | ) | $ | (42 | ) | $ | (24 | ) | $ | (66 | ) | ||||||
Notional amount, net (in TBtu) (3) | 9,455 | 25 | 5,832 | 12 |
(1) | Does not include collateral calls of $20 million and $5 million for such contracts, which are included in other current assets in our Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, respectively. Includes derivative assets of $0.1 million and $2 million and non-current assets of $1 million and $3 million as of September 30, 2019 and December 31, 2018, respectively, for a natural gas supply contract CCL has with a related party. |
(2) | Does not include collateral of $20 million and $9 million deposited for such contracts, which are included in other current assets in our Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, respectively. |
(3) | SPL had secured up to approximately 4,108 TBtu and 3,464 TBtu as of September 30, 2019 and December 31, 2018, respectively. CCL had secured up to approximately 3,065 TBtu and 2,801 TBtu of natural gas feedstock through natural gas supply contracts as of September 30, 2019 and December 31, 2018, respectively, of which 122 TBtu and 55 TBtu, respectively, were for a natural gas supply contract CCL has with a related party. CCL Stage III had secured up to approximately 2,361 TBtu of natural gas feedstock through natural gas supply contracts as of September 30, 2019. |
The following table shows the changes in the fair value, settlements and location of our Commodity Derivatives recorded on our Consolidated Statements of Operations during the three and nine months ended September 30, 2019 and 2018 (in millions):
Consolidated Statements of Operations Location (1) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||
LNG Trading Derivatives gain (loss) | LNG revenues | $ | 22 | $ | (58 | ) | $ | 180 | $ | (128 | ) | ||||||
LNG Trading Derivatives loss | Cost of sales | (17 | ) | — | (68 | ) | — | ||||||||||
Liquefaction Supply Derivatives gain (2) | LNG revenues | — | — | 1 | — | ||||||||||||
Liquefaction Supply Derivatives gain (loss) (2)(3) | Cost of sales | (139 | ) | 21 | — | (32 | ) |
(1) | Fair value fluctuations associated with commodity derivative activities are classified and presented consistently with the item economically hedged and the nature and intent of the derivative instrument. |
(2) | Does not include the realized value associated with derivative instruments that settle through physical delivery. |
(3) | Includes $23 million and $59 million that CCL recorded in cost of sales under a natural gas supply contract with a related party during the three and nine months ended September 30, 2019, respectively. Of this amount, $1 million was included in accrued liabilities as of September 30, 2019. CCL did not have any transactions during the three and nine months ended September 30, 2018 under this contract. |
14
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
FX Derivatives
The following table shows the fair value and location of our FX Derivatives on our Consolidated Balance Sheets (in millions):
Fair Value Measurements as of | |||||||||
Consolidated Balance Sheet Location | September 30, 2019 | December 31, 2018 | |||||||
FX Derivatives | Derivative assets | $ | 35 | $ | 16 | ||||
FX Derivatives | Non-current derivative assets | 2 | — | ||||||
FX Derivatives | Derivative liabilities | — | (1 | ) |
The total notional amount of our FX Derivatives was $745 million and $379 million as of September 30, 2019 and December 31, 2018, respectively.
The following table shows the changes in the fair value, settlements and location of our FX Derivatives recorded on our Consolidated Statements of Operations during the three and nine months ended September 30, 2019 and 2018 (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Consolidated Statements of Operations Location | 2019 | 2018 | 2019 | 2018 | |||||||||||||
FX Derivatives gain | LNG revenues | $ | 43 | $ | 1 | $ | 52 | $ | 11 |
Consolidated Balance Sheet Presentation
Our derivative instruments are presented on a net basis on our Consolidated Balance Sheets as described above. The following table shows the fair value of our derivatives outstanding on a gross and net basis (in millions):
Gross Amounts Recognized | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts Presented in the Consolidated Balance Sheets | ||||||||||
Offsetting Derivative Assets (Liabilities) | ||||||||||||
As of September 30, 2019 | ||||||||||||
CCH Interest Rate Derivatives | $ | (104 | ) | $ | — | $ | (104 | ) | ||||
CCH Interest Rate Forward Start Derivatives | (68 | ) | — | (68 | ) | |||||||
Liquefaction Supply Derivatives | 175 | (28 | ) | 147 | ||||||||
Liquefaction Supply Derivatives | (208 | ) | 9 | (199 | ) | |||||||
LNG Trading Derivatives | 84 | (5 | ) | 79 | ||||||||
LNG Trading Derivatives | (56 | ) | 1 | (55 | ) | |||||||
FX Derivatives | 45 | (8 | ) | 37 | ||||||||
As of December 31, 2018 | ||||||||||||
CCH Interest Rate Derivatives | $ | 19 | $ | (1 | ) | $ | 18 | |||||
Liquefaction Supply Derivatives | 95 | (36 | ) | 59 | ||||||||
Liquefaction Supply Derivatives | (121 | ) | 20 | (101 | ) | |||||||
LNG Trading Derivatives | 112 | (88 | ) | 24 | ||||||||
LNG Trading Derivatives | (92 | ) | 44 | (48 | ) | |||||||
FX Derivatives | 30 | (14 | ) | 16 | ||||||||
FX Derivatives | (2 | ) | 1 | (1 | ) |
15
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 7—OTHER NON-CURRENT ASSETS
As of September 30, 2019 and December 31, 2018, other non-current assets, net consisted of the following (in millions):
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Advances made to municipalities for water system enhancements | $ | 88 | $ | 90 | ||||
Advances and other asset conveyances to third parties to support LNG terminals | 54 | 54 | ||||||
Tax-related payments and receivables | 20 | 21 | ||||||
Equity method investments | 73 | 94 | ||||||
Advances made under EPC and non-EPC contracts | 5 | 14 | ||||||
Other | 47 | 32 | ||||||
Total other non-current assets, net | $ | 287 | $ | 305 |
Equity Method Investments
Our equity method investments consist of interests in privately-held companies. In 2017, we acquired an equity interest in Midship Holdings, LLC (“Midship Holdings”), which manages the business and affairs of Midship Pipeline Company, LLC (“Midship Pipeline”). Midship Pipeline is currently constructing an approximately 200-mile natural gas pipeline project (the “Midship Project”) that connects production in the Anadarko Basin to Gulf Coast markets. Construction of the Midship Project commenced in the first quarter of 2019.
Subsequent to Midship Project obtaining its financing in the form of credit facilities, in conjunction with existing equity, Midship Holdings was designed to finance its activities without additional subordinated financial support. As a result, Midship Holdings is no longer a variable interest entity. We continue to report Midship Holdings as an equity method investment due to our ability to exercise significant influence over the operating and financial policies of Midship Holdings through our non-controlling voting rights on its board of managers.
During the three and nine months ended September 30, 2019, we recognized impairment losses of $87 million relating to our investments in certain equity method investees, including Midship Holdings. Impairments were precipitated primarily by cost overruns and extended construction timelines for operating infrastructure of our investees’ projects, resulting in a reduction of the expected fair value of our equity interests. Impairment losses associated with our equity method investments are presented in other expense (income).
Our investment in Midship Holdings was $70 million, net of impairment losses, and $85 million at September 30, 2019 and December 31, 2018, respectively.
Cheniere LNG O&M Services, LLC (“O&M Services”), our wholly owned subsidiary, provides the development, construction, operation and maintenance services associated with the Midship Project pursuant to agreements in which O&M Services receives an agreed upon fee and reimbursement of costs incurred. O&M Services recorded $2 million and $4 million in the three months ended September 30, 2019 and 2018, respectively, and $9 million and $8 million in the nine months ended September 30, 2019 and 2018, respectively, of other revenues and $2 million and $4 million of accounts receivable as of September 30, 2019 and December 31, 2018, respectively, for services provided to Midship Pipeline under these agreements. CCL has entered into a transportation precedent agreement and a negotiated rate agreement with Midship Pipeline to secure firm pipeline transportation capacity for a period of 10 years following commencement of the Midship Project. In May 2018, CCL issued a letter of credit to Midship Pipeline for drawings up to an aggregate maximum amount of $16 million. Midship Pipeline had not made any drawings on this letter of credit as of September 30, 2019.
NOTE 8—NON-CONTROLLING INTEREST AND VARIABLE INTEREST ENTITY
We own a 48.6% limited partner interest in Cheniere Partners in the form of 104.5 million common units and 135.4 million subordinated units, with the remaining non-controlling interest held by Blackstone CQP Holdco LP and the public. We also own 100% of the general partner interest and the incentive distribution rights in Cheniere Partners. Cheniere Partners is accounted for as a consolidated variable interest entity. See Note 10—Variable Interest Entities of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2018 for further information.
16
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table presents the summarized assets and liabilities (in millions) of Cheniere Partners, our consolidated VIE, which are included in our Consolidated Balance Sheets. The assets in the table below may only be used to settle obligations of Cheniere Partners. In addition, there is no recourse to us for the consolidated VIE’s liabilities. The assets and liabilities in the table below include third-party assets and liabilities of Cheniere Partners only and exclude intercompany balances that eliminate in consolidation.
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 1,707 | $ | — | ||||
Restricted cash | 185 | 1,541 | ||||||
Accounts and other receivables | 277 | 348 | ||||||
Other current assets | 176 | 125 | ||||||
Total current assets | 2,345 | 2,014 | ||||||
Property, plant and equipment, net | 16,338 | 15,390 | ||||||
Other non-current assets, net | 294 | 228 | ||||||
Total assets | $ | 18,977 | $ | 17,632 | ||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Accrued liabilities | $ | 657 | $ | 821 | ||||
Other current liabilities | 221 | 197 | ||||||
Total current liabilities | 878 | 1,018 | ||||||
Long-term debt, net | 17,571 | 16,066 | ||||||
Other non-current liabilities | 120 | 18 | ||||||
Total liabilities | $ | 18,569 | $ | 17,102 |
NOTE 9—ACCRUED LIABILITIES
As of September 30, 2019 and December 31, 2018, accrued liabilities consisted of the following (in millions):
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Interest costs and related debt fees | $ | 318 | $ | 233 | ||||
Accrued natural gas purchases | 385 | 610 | ||||||
LNG terminals and related pipeline costs | 329 | 125 | ||||||
Compensation and benefits | 83 | 117 | ||||||
Accrued LNG inventory | 3 | 14 | ||||||
Other accrued liabilities | 81 | 70 | ||||||
Total accrued liabilities | $ | 1,199 | $ | 1,169 |
17
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 10—DEBT
As of September 30, 2019 and December 31, 2018, our debt consisted of the following (in millions):
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Long-term debt: | ||||||||
SPL | ||||||||
5.625% Senior Secured Notes due 2021 (“2021 SPL Senior Notes”) | $ | 2,000 | $ | 2,000 | ||||
6.25% Senior Secured Notes due 2022 (“2022 SPL Senior Notes”) | 1,000 | 1,000 | ||||||
5.625% Senior Secured Notes due 2023 (“2023 SPL Senior Notes”) | 1,500 | 1,500 | ||||||
5.75% Senior Secured Notes due 2024 (“2024 SPL Senior Notes”) | 2,000 | 2,000 | ||||||
5.625% Senior Secured Notes due 2025 (“2025 SPL Senior Notes”) | 2,000 | 2,000 | ||||||
5.875% Senior Secured Notes due 2026 (“2026 SPL Senior Notes”) | 1,500 | 1,500 | ||||||
5.00% Senior Secured Notes due 2027 (“2027 SPL Senior Notes”) | 1,500 | 1,500 | ||||||
4.200% Senior Secured Notes due 2028 (“2028 SPL Senior Notes”) | 1,350 | 1,350 | ||||||
5.00% Senior Secured Notes due 2037 (“2037 SPL Senior Notes”) | 800 | 800 | ||||||
Cheniere Partners | ||||||||
5.250% Senior Notes due 2025 (“2025 CQP Senior Notes”) | 1,500 | 1,500 | ||||||
5.625% Senior Notes due 2026 (“2026 CQP Senior Notes”) | 1,100 | 1,100 | ||||||
4.500% Senior Notes due 2029 (“2029 CQP Senior Notes”) | 1,500 | — | ||||||
2016 CQP Credit Facilities | — | — | ||||||
CQP Credit Facilities executed in 2019 (“2019 CQP Credit Facilities”) | — | — | ||||||
CCH | ||||||||
7.000% Senior Secured Notes due 2024 (“2024 CCH Senior Notes”) | 1,250 | 1,250 | ||||||
5.875% Senior Secured Notes due 2025 (“2025 CCH Senior Notes”) | 1,500 | 1,500 | ||||||
5.125% Senior Secured Notes due 2027 (“2027 CCH Senior Notes”) | 1,500 | 1,500 | ||||||
4.80% Senior Secured Notes due 2039 (“4.80% CCH Senior Notes”) | 727 | — | ||||||
CCH Credit Facility | 5,341 | 5,156 | ||||||
CCH HoldCo II | ||||||||
11.0% Convertible Senior Secured Notes due 2025 (“2025 CCH HoldCo II Convertible Senior Notes”) | 1,578 | 1,455 | ||||||
Cheniere | ||||||||
4.875% Convertible Unsecured Notes due 2021 (“2021 Cheniere Convertible Unsecured Notes”) | 1,247 | 1,218 | ||||||
4.25% Convertible Senior Notes due 2045 (“2045 Cheniere Convertible Senior Notes”) | 625 | 625 | ||||||
$1.25 billion Cheniere Revolving Credit Facility (“Cheniere Revolving Credit Facility”) | — | — | ||||||
Unamortized premium, discount and debt issuance costs, net | (723 | ) | (775 | ) | ||||
Total long-term debt, net | 30,795 | 28,179 | ||||||
Current debt: | ||||||||
$1.2 billion SPL Working Capital Facility (“SPL Working Capital Facility”) | — | — | ||||||
$1.2 billion CCH Working Capital Facility (“CCH Working Capital Facility”) | — | 168 | ||||||
Cheniere Marketing trade finance facilities | 11 | 71 | ||||||
Total current debt | 11 | 239 | ||||||
Total debt, net | $ | 30,806 | $ | 28,418 |
2019 Debt Issuances and Terminations
4.80% CCH Senior Notes
In September 2019, CCH issued an aggregate principal amount of $727 million of the 4.80% CCH Senior Notes in a private placement conducted pursuant to Section 4(a)(2) of the Securities Act. The 4.80% CCH Senior Notes were issued under an indenture dated as of September 27, 2019 (the “2019 CCH Indenture”) pursuant to a note purchase agreement with the purchasers party thereto and Allianz Global Investors GmbH, as noteholder consultant, originally entered into in June 2019. The 4.80% CCH Senior Notes are jointly and severally guaranteed by each of CCH’s subsidiaries CCL, CCP and Corpus Christi Pipeline GP, LLC
18
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
(each a “CCH Guarantor” and collectively, the “CCH Guarantors”). The proceeds of the notes were used to prepay a portion of the outstanding balance of the CCH Credit Facility, resulting in the recognition of debt extinguishment costs of $13 million for the three and nine months ended September 30, 2019 relating to the write off of unamortized debt discounts and issuance costs. The 4.80% CCH Senior Notes accrue interest at a fixed rate of 4.80% per annum and are fully amortizing according to a fixed sculpted amortization schedule with semi-annual payments of interest starting December 2019 and semi-annual payments of principal starting June 2027. The 4.80% CCH Senior Notes have a weighted average life of 15 years.
The 4.80% CCH Senior Notes are CCH’s senior secured obligation, ranking senior in right of payment to any and all of CCH’s future indebtedness that is subordinated to the 4.80% CCH Senior Notes and equal in right of payment with CCH’s other existing and future indebtedness that is senior and secured by the same collateral securing the 4.80% CCH Senior Notes. The 4.80% CCH Senior Notes are secured by a first-priority security interest in substantially all of CCH’s and the CCH Guarantors’ assets.
At any time prior to June 30, 2039, CCH may redeem all or a part of the 4.80% CCH Senior Notes at a redemption price equal to the “make-whole” price set forth in the 2019 CCH Indenture, plus accrued and unpaid interest, if any, to the date of redemption. CCH also may at any time on or after June 30, 2039, redeem the 4.80% CCH Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the 4.80% CCH Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.
The 2019 CCH Indenture contains customary terms and events of default and certain covenants that, among other things, limit CCH’s ability and the ability of CCH’s restricted subsidiaries to incur additional indebtedness or issue preferred stock, make certain investments or pay dividends or distributions on membership interests or subordinated indebtedness or purchase, redeem or retire membership interests, sell or transfer assets, including membership or partnership interests of CCH’s restricted subsidiaries, restrict dividends or other payments by restricted subsidiaries to CCH or any of CCH’s restricted subsidiaries, incur liens, enter into transactions with affiliates, dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of the properties or assets of CCH and its restricted subsidiaries taken as a whole or permit any CCH Guarantor to dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of its properties and assets. The 2019 CCH Indenture covenants are subject to a number of important limitations and exceptions.
2029 CQP Senior Notes
In September 2019, Cheniere Partners issued an aggregate principal amount of $1.5 billion of the 2029 CQP Senior Notes, which are jointly and severally guaranteed by each of Cheniere Partners’ subsidiaries other than SPL and, subject to certain conditions governing its guarantee, Sabine Pass LP (the “CQP Guarantors”). The proceeds of the offering were used to prepay the outstanding balance of the $750 million term loan under the 2019 CQP Credit Facilities (“CQP Term Facility”) and for general corporate purposes, including funding future capital expenditures in connection with the construction of Train 6 at the SPL Project, resulting in the recognition of debt modification and extinguishment costs of $13 million for the three and nine months ended September 30, 2019. As of September 30, 2019, only the $750 million revolving credit facility (“CQP Revolving Facility”), all of which is undrawn, remains as part of the 2019 CQP Credit Facilities.
Borrowings under the 2029 CQP Senior Notes accrue interest at a fixed rate of 4.500% per annum, and interest on the 2029 CQP Senior Notes is payable semi-annually in cash in arrears. The 2029 CQP Senior Notes are governed by the same base indenture as the 2025 CQP Senior Notes and the 2026 CQP Senior Notes (the “CQP Base Indenture”) and are further governed by the Third Supplemental Indenture (together with the CQP Base Indenture, the “2029 CQP Notes Indenture”), which contains customary terms and events of default and certain covenants that, among other things, limit the ability of Cheniere Partners and the CQP Guarantors to incur liens and sell assets, enter into transactions with affiliates, enter into sale-leaseback transactions and consolidate, merge or sell, lease or otherwise dispose of all or substantially all of the applicable entity’s properties or assets.
At any time prior to October 1, 2024, Cheniere Partners may redeem all or a part of the 2029 CQP Senior Notes at a redemption price equal to 100% of the aggregate principal amount of the 2029 CQP Senior Notes redeemed, plus the “applicable premium” set forth in the 2029 CQP Notes Indenture, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior to October 1, 2022, Cheniere Partners may redeem up to 35% of the aggregate principal amount of the 2029 CQP Senior Notes with an amount of cash not greater than the net cash proceeds from certain equity offerings at a redemption price equal to 104.5% of the aggregate principal amount of the 2029 CQP Senior Notes redeemed, plus accrued and unpaid interest, if any, to the date of redemption. At any time on or after October 1, 2024 through the maturity date of October 1, 2029, Cheniere
19
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Partners may redeem the 2029 CQP Senior Notes, in whole or in part, at the redemption prices set forth in the 2029 CQP Notes Indenture.
The 2025 CQP Senior Notes, the 2026 CQP Senior Notes and the 2029 CQP Senior Notes (collectively, the “CQP Senior Notes”) are Cheniere Partners’ senior obligations, ranking equally in right of payment with Cheniere Partners’ other existing and future unsubordinated debt and senior to any of its future subordinated debt. In the event that the aggregate amount of Cheniere Partners’ secured indebtedness and the secured indebtedness of the CQP Guarantors (other than the CQP Senior Notes or any other series of notes issued under the CQP Base Indenture) outstanding at any one time exceeds the greater of (1) $1.5 billion and (2) 10% of net tangible assets, the CQP Senior Notes will be secured to the same extent as such obligations under the 2019 CQP Credit Facilities. The obligations under the 2019 CQP Credit Facilities are secured on a first-priority basis (subject to permitted encumbrances) with liens on (1) substantially all the existing and future tangible and intangible assets and rights of Cheniere Partners and the CQP Guarantors and equity interests in the CQP Guarantors (except, in each case, for certain excluded properties set forth in the 2019 CQP Credit Facilities) and (2) substantially all of the real property of SPLNG (except for excluded properties referenced in the 2019 CQP Credit Facilities). The liens securing the CQP Senior Notes, if applicable, will be shared equally and ratably (subject to permitted liens) with the holders of other senior secured obligations, which include the 2019 CQP Credit Facilities obligations and any future additional senior secured debt obligations.
In connection with the closing of the 2029 CQP Senior Notes offering, Cheniere Partners and the CQP Guarantors entered into a registration rights agreement (the “CQP Registration Rights Agreement”). Under the CQP Registration Rights Agreement, Cheniere Partners and the CQP Guarantors have agreed to file with the SEC and cause to become effective a registration statement relating to an offer to exchange any and all of the 2029 CQP Senior Notes for a like aggregate principal amount of debt securities of Cheniere Partners with terms identical in all material respects to the 2029 CQP Senior Notes sought to be exchanged (other than with respect to restrictions on transfer or to any increase in annual interest rate), within 360 days after the notes issuance date of September 12, 2019. Under specified circumstances, Cheniere Partners and the CQP Guarantors have also agreed to cause to become effective a shelf registration statement relating to resales of the 2029 CQP Senior Notes. Cheniere Partners will be obligated to pay additional interest on the 2029 CQP Senior Notes if it fails to comply with its obligation to register the 2029 CQP Senior Notes within the specified time period.
2016 CQP Credit Facilities
In May 2019, the remaining commitments under the 2016 CQP Credit Facilities were terminated. There were no write-offs of debt issuance costs associated with the termination of the 2016 CQP Credit Facilities.
2019 CQP Credit Facilities
In May 2019, Cheniere Partners entered into the 2019 CQP Credit Facilities, which consisted of the $750 million CQP Term Facility, which was prepaid and terminated upon issuance of the 2029 CQP Senior Notes in September 2019, and the $750 million CQP Revolving Facility. Borrowings under the 2019 CQP Credit Facilities will be used to fund the development and construction of Train 6 of the SPL Project and for general corporate purposes, subject to a sublimit, and the 2019 CQP Credit Facilities are also available for the issuance of letters of credit.
Loans under the 2019 CQP Credit Facilities accrue interest at a variable rate per annum equal to LIBOR or the base rate (equal to the highest of the prime rate, the federal funds effective rate, as published by the Federal Reserve Bank of New York, plus 0.50%, and the adjusted one-month LIBOR plus 1.0%), plus the applicable margin. Under the CQP Term Facility, the applicable margin for LIBOR loans was 1.50% per annum, and the applicable margin for base rate loans was 0.50% per annum. Under the CQP Revolving Facility, the applicable margin for LIBOR loans is 1.25% to 2.125% per annum, and the applicable margin for base rate loans is 0.25% to 1.125% per annum, in each case depending on the then-current rating of Cheniere Partners. Interest on LIBOR loans is due and payable at the end of each applicable LIBOR period (and at the end of every three-month period within the LIBOR period, if any), and interest on base rate loans is due and payable at the end of each calendar quarter.
The 2019 CQP Credit Facilities mature on May 29, 2024. Any outstanding balance may be repaid, in whole or in part, at any time without premium or penalty, except for interest rate breakage costs. The 2019 CQP Credit Facilities contain conditions precedent for extensions of credit, as well as customary affirmative and negative covenants, and limit Cheniere Partners’ ability to make restricted payments, including distributions, to once per fiscal quarter and one true-up per fiscal quarter as long as certain conditions are satisfied.
20
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The 2019 CQP Credit Facilities are unconditionally guaranteed and secured by a first priority lien (subject to permitted encumbrances) on substantially all of Cheniere Partners’ and the CQP Guarantors’ existing and future tangible and intangible assets and rights and equity interests in the CQP Guarantors (except, in each case, for certain excluded properties set forth in the 2019 CQP Credit Facilities).
CCH Credit Facility
As part of the capital allocation framework announced in June 2019, we prepaid $70 million of outstanding borrowings under the CCH Credit Facility during the three and nine months ended September 30, 2019. The prepayment resulted in the recognition of debt extinguishment costs of $1 million for the three and nine months ended September 30, 2019.
Credit Facilities
Below is a summary of our credit facilities outstanding as of September 30, 2019 (in millions):
SPL Working Capital Facility (1) | 2019 CQP Credit Facilities | CCH Credit Facility | CCH Working Capital Facility | Cheniere Revolving Credit Facility | ||||||||||||||||
Original facility size | $ | 1,200 | $ | 1,500 | $ | 8,404 | $ | 350 | $ | 750 | ||||||||||
Incremental commitments | — | — | 1,566 | 850 | 500 | |||||||||||||||
Less: | ||||||||||||||||||||
Outstanding balance | — | — | 5,341 | — | — | |||||||||||||||
Commitments prepaid or terminated | — | 750 | 4,629 | — | — | |||||||||||||||
Letters of credit issued | 414 | — | — | 583 | 876 | |||||||||||||||
Available commitment | $ | 786 | $ | 750 | $ | — | $ | 617 | $ | 374 | ||||||||||
Interest rate on available balance | LIBOR plus 1.75% or base rate plus 0.75% | LIBOR plus 1.25% - 2.125% or base rate plus 0.25% - 1.125% | LIBOR plus 1.75% or base rate plus 0.75% | LIBOR plus 1.25% - 1.75% or base rate plus 0.25% - 0.75% | LIBOR plus 1.75% - 2.50% or base rate plus 0.75% - 1.50% | |||||||||||||||
Weighted average interest rate of outstanding balance | n/a | n/a | 3.79% | n/a | n/a | |||||||||||||||
Maturity date | December 31, 2020 | May 29, 2024 | June 30, 2024 | June 29, 2023 | December 23, 2022 |
(1) | The SPL Working Capital Facility was amended in May 2019 in connection with commercialization and financing of Train 6 of the SPL Project. All terms of the SPL Working Capital Facility substantially remained unchanged. |
21
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Convertible Notes
Below is a summary of our convertible notes outstanding as of September 30, 2019 (in millions):
2021 Cheniere Convertible Unsecured Notes | 2025 CCH HoldCo II Convertible Senior Notes | 2045 Cheniere Convertible Senior Notes | ||||||||||
Aggregate original principal | $ | 1,000 | $ | 1,000 | $ | 625 | ||||||
Debt component, net of discount and debt issuance costs | $ | 1,181 | $ | 1,564 | $ | 312 | ||||||
Equity component | $ | 210 | $ | — | $ | 194 | ||||||
Interest payment method | Paid-in-kind | Paid-in-kind / cash (1) | Cash | |||||||||
Conversion by us (2) | — | (3) | (4) | |||||||||
Conversion by holders (2) | (5) | (6) | (7) | |||||||||
Conversion basis | Cash and/or stock | Stock | Cash and/or stock | |||||||||
Conversion value in excess of principal | $ | — | $ | — | $ | — | ||||||
Maturity date | May 28, 2021 | May 13, 2025 | March 15, 2045 | |||||||||
Contractual interest rate | 4.875 | % | 11.0 | % | 4.25 | % | ||||||
Effective interest rate (8) | 8.4 | % | 12.0 | % | 9.4 | % | ||||||
Remaining debt discount and debt issuance costs amortization period (9) | 1.7 years | 1.0 years | 25.5 years |
(1) | Prior to the substantial completion of Train 2 of the CCL Project, interest was paid entirely in kind. Following substantial completion, the interest generally must be paid in cash; however, a portion of the interest may be paid in kind under certain specified circumstances. |
(2) | Conversion is subject to various limitations and conditions. |
(3) | Convertible on or after March 1, 2020, provided that our market capitalization is not less than $10.0 billion (“Eligible Conversion Date”). The conversion price is the lower of (1) a 10% discount to the average of the daily volume-weighted average price (“VWAP”) of our common stock for the 90 trading day period prior to the date notice is provided, and (2) a 10% discount to the closing price of our common stock on the trading day preceding the date notice is provided. |
(4) | Redeemable at any time after March 15, 2020 at a redemption price payable in cash equal to the accreted amount of the 2045 Cheniere Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to such redemption date. |
(5) | Initially convertible at $93.64 (subject to adjustment upon the occurrence of certain specified events), provided that the closing price of our common stock is greater than or equal to the conversion price on the conversion date. |
(6) | Convertible on or after the six-month anniversary of the Eligible Conversion Date, provided that our total market capitalization is not less than $10.0 billion, at a price equal to the average of the daily VWAP of our common stock for the 90 trading day period prior to the date on which notice of conversion is provided. |
(7) | Prior to December 15, 2044, convertible only under certain circumstances as specified in the indenture; thereafter, holders may convert their notes regardless of these circumstances. The conversion rate will initially equal 7.2265 shares of our common stock per $1,000 principal amount of the 2045 Cheniere Convertible Senior Notes, which corresponds to an initial conversion price of approximately $138.38 per share of our common stock (subject to adjustment upon the occurrence of certain specified events). |
(8) | Rate to accrete the discounted carrying value of the convertible notes to the face value over the remaining amortization period. |
(9) | We amortize any debt discount and debt issuance costs using the effective interest over the period through contractual maturity except for the 2025 CCH HoldCo II Convertible Senior Notes, which are amortized through the date they are first convertible by holders into our common stock. |
22
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Restrictive Debt Covenants
As of September 30, 2019, each of our issuers was in compliance with all covenants related to their respective debt agreements.
Interest Expense
Total interest expense, including interest expense related to our convertible notes, consisted of the following (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Interest cost on convertible notes: | ||||||||||||||||
Interest per contractual rate | $ | 65 | $ | 60 | $ | 191 | $ | 176 | ||||||||
Amortization of debt discount | 10 | 9 | 29 | 25 | ||||||||||||
Amortization of debt issuance costs | 3 | 3 | 9 | 7 | ||||||||||||
Total interest cost related to convertible notes | 78 | 72 | 229 | 208 | ||||||||||||
Interest cost on debt and finance leases excluding convertible notes | 390 | 354 | 1,145 | 1,034 | ||||||||||||
Total interest cost | 468 | 426 | 1,374 | 1,242 | ||||||||||||
Capitalized interest | (73 | ) | (205 | ) | (360 | ) | (589 | ) | ||||||||
Total interest expense, net | $ | 395 | $ | 221 | $ | 1,014 | $ | 653 |
Fair Value Disclosures
The following table shows the carrying amount, which is net of unamortized premium, discount and debt issuance costs, and estimated fair value of our debt (in millions):
September 30, 2019 | December 31, 2018 | |||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||
Senior notes (1) | $ | 20,978 | $ | 23,091 | $ | 19,466 | $ | 19,901 | ||||||||
2037 SPL Senior Notes (2) | 791 | 909 | 791 | 817 | ||||||||||||
4.80% CCH Senior Notes (2) | 720 | 768 | — | — | ||||||||||||
Credit facilities (3) | 5,260 | 5,260 | 5,294 | 5,294 | ||||||||||||
2021 Cheniere Convertible Unsecured Notes (2) | 1,181 | 1,291 | 1,126 | 1,236 | ||||||||||||
2025 CCH HoldCo II Convertible Senior Notes (2) | 1,564 | 1,792 | 1,432 | 1,612 | ||||||||||||
2045 Cheniere Convertible Senior Notes (4) | 312 | 483 | 310 | 431 |
(1) | Includes 2021 SPL Senior Notes, 2022 SPL Senior Notes, 2023 SPL Senior Notes, 2024 SPL Senior Notes, 2025 SPL Senior Notes, 2026 SPL Senior Notes, 2027 SPL Senior Notes, 2028 SPL Senior Notes, 2025 CQP Senior Notes, 2026 CQP Senior Notes, 2029 CQP Senior Notes, 2024 CCH Senior Notes, 2025 CCH Senior Notes and 2027 CCH Senior Notes. The Level 2 estimated fair value was based on quotes obtained from broker-dealers or market makers of these senior notes and other similar instruments. |
(2) | The Level 3 estimated fair value was calculated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and interest rates based on debt issued by parties with comparable credit ratings to us and inputs that are not observable in the market. |
(3) | Includes SPL Working Capital Facility, 2016 CQP Credit Facilities, 2019 CQP Credit Facilities, CCH Credit Facility, CCH Working Capital Facility, Cheniere Revolving Credit Facility and Cheniere Marketing trade finance facilities. The Level 3 estimated fair value approximates the principal amount because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty. |
(4) | The Level 1 estimated fair value was based on unadjusted quoted prices in active markets for identical liabilities that we had the ability to access at the measurement date. |
23
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 11—LEASES
Our leased assets consist primarily of (1) LNG vessel time charters (“vessel charters”), (2) tug vessels, (3) office space and facilities and (4) land sites, all of which are classified as operating leases except for our tug vessels at the Corpus Christi LNG terminal, which are classified as finance leases.
ASC 842 requires a lessee to recognize leases on its balance sheet by recording a lease liability representing the obligation to make future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. As our leases generally do not provide an implicit rate, in order to calculate the lease liability, we discounted our expected future lease payments using our relevant subsidiary’s incremental borrowing rate at the later of January 1, 2019 or the commencement date of the lease. The incremental borrowing rate is an estimate of the rate of interest that a given subsidiary would have to pay to borrow on a collateralized basis over a similar term to that of the lease term.
Many of our leases contain renewal options exercisable at our sole discretion. Options to renew a lease are included in the lease term and recognized as part of the right-of-use asset and lease liability only to the extent they are reasonably certain to be exercised, such as when necessary to satisfy obligations that existed at the execution of the lease or when the non-renewal would otherwise result in an economic penalty.
We have elected the practical expedient to omit leases with an initial term of 12 months or less (“short-term lease”) from recognition on the balance sheet. We recognize short-term lease payments on a straight-line basis over the lease term and variable payments under short-term leases in the period in which the obligation is incurred.
Certain of our leases contain non-lease components which are not separated from the lease components when calculating the right-of-use asset and lease liability per our use of the practical expedient to combine both components of an arrangement for all classes of leased assets.
Certain of our leases also contain variable payments, such as inflation, that are not included when calculating the right-of-use asset and lease liability unless the payments are in-substance fixed.
We recognize lease expense for operating leases on a straight-line basis over the lease term. We recognize lease expense for finance leases as the sum of the amortization of the right-of-use assets on a straight-line basis and the interest on lease liabilities using the effective interest method over the lease term.
The following table shows the classification and location of our right-of-use assets and lease liabilities on our Consolidated Balance Sheets (in millions):
Consolidated Balance Sheet Location | September 30, 2019 | ||||
Right-of-use assets—Operating | Operating lease assets, net | $ | 493 | ||
Right-of-use assets—Financing | Property, plant and equipment, net | 57 | |||
Total right-of-use assets | $ | 550 | |||
Current operating lease liabilities | Current operating lease liabilities | $ | 275 | ||
Current finance lease liabilities | Other current liabilities | 2 | |||
Non-current operating lease liabilities | Non-current operating lease liabilities | 203 | |||
Non-current finance lease liabilities | Non-current finance lease liabilities | 58 | |||
Total lease liabilities | $ | 538 |
24
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table shows the classification and location of our lease cost on our Consolidated Statements of Operations (in millions):
Consolidated Statement of Operations Location | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | |||||||
Operating lease cost (1) | Operating costs and expenses (2) | $ | 163 | $ | 440 | ||||
Finance lease cost: | |||||||||
Amortization of right-of-use assets | Depreciation and amortization expense | 1 | 3 | ||||||
Interest on lease liabilities | Interest expense, net of capitalized interest | 2 | 7 | ||||||
Total lease cost | $ | 166 | $ | 450 |
(1) | Includes $57 million and $150 million of short-term lease costs and $8 million and $21 million of variable lease costs incurred during the three and nine months ended September 30, 2019, respectively. |
(2) | Presented in cost of sales, operating and maintenance expense or selling, general and administrative expense consistent with the nature of the asset under lease. |
Future annual minimum lease payments for operating and finance leases as of September 30, 2019 are as follows (in millions):
Years Ending December 31, | Operating Leases (1) | Finance Leases | |||||
2019 | $ | 113 | $ | 5 | |||
2020 | 218 | 10 | |||||
2021 | 51 | 10 | |||||
2022 | 19 | 10 | |||||
2023 | 19 | 10 | |||||
Thereafter | 166 | 146 | |||||
Total lease payments | 586 | 191 | |||||
Less: Interest | (106 | ) | (129 | ) | |||
Present value of lease liabilities | $ | 480 | $ | 62 |
(1) | Does not include $1.6 billion of legally binding minimum lease payments for vessel charters which were executed as of September 30, 2019 but will commence primarily between 2020 and 2021 and have fixed minimum lease terms of up to seven years. |
Future annual minimum lease payments for operating and capital leases as of December 31, 2018, prepared in accordance with accounting standards prior to the adoption of ASC 842, were as follows (in millions):
Years Ending December 31, | Operating Leases (1) | Capital Leases (2) | |||||
2019 (3) | $ | 380 | $ | 5 | |||
2020 | 184 | 5 | |||||
2021 | 238 | 5 | |||||
2022 | 264 | 5 | |||||
2023 | 264 | 5 | |||||
Thereafter | 999 | 73 | |||||
Total lease payments | 2,329 | 98 | |||||
Less: Interest | — | (39 | ) | ||||
Present value of lease liabilities | $ | 2,329 | $ | 59 |
(1) | Includes certain lease option renewals that are reasonably assured and payments for certain non-lease components. Also includes $79 million in payments for short-term leases and $1.6 billion in payments for LNG vessel charters which were previously executed but will commence primarily between 2020 and 2021. |
(2) | Does not include payments for non-lease components of $98 million. |
(3) | Does not include $43 million in aggregate payments we will receive from our LNG vessel subcharters. |
25
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table shows the weighted-average remaining lease term (in years) and the weighted-average discount rate for our operating leases and finance leases:
September 30, 2019 | |||
Operating Leases | Finance Leases | ||
Weighted-average remaining lease term (in years) | 7.1 | 18.9 | |
Weighted-average discount rate (1) | 5.3% | 16.2% |
(1) | The finance leases commenced prior to the adoption of ASC 842. In accordance with previous accounting guidance, the implied rate is based on the fair value of the underlying assets. |
The following table includes other quantitative information for our operating and finance leases (in millions):
Nine Months Ended September 30, 2019 | |||
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows from operating leases | $ | 280 | |
Operating cash flows from finance leases | 6 | ||
Financing cash flows from finance leases | — | ||
Right-of-use assets obtained in exchange for new operating lease liabilities | 189 |
LNG Vessel Subcharters
From time to time, we sublease certain LNG vessels under charter to third parties while retaining our existing obligation to the original lessor. We have elected the practical expedient for lessors to combine lease and non-lease components and since the lease component is the predominant component of each arrangement, these subleases are accounted for as operating leases. The subleases have lease terms of up to one year and many contain short-term renewal options exercisable at the discretion of the third party. As of September 30, 2019, we had $3 million in future minimum sublease payments to be received from LNG vessel subcharters, which will be recognized entirely within 2019. We recognize fixed sublease income on a straight-line basis over the lease term of the sublease while variable sublease income is recognized when earned. We recognized $28 million and $96 million of sublease income, including $5 million and $15 million of variable lease payments, during the three and nine months ended September 30, 2019, respectively, in other revenues on our Consolidated Statements of Operations.
NOTE 12—REVENUES FROM CONTRACTS WITH CUSTOMERS
The following table represents a disaggregation of revenue earned from contracts with customers during the three and nine months ended September 30, 2019 and 2018 (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
LNG revenues | $ | 1,995 | $ | 1,776 | $ | 6,142 | $ | 5,444 | ||||||||
Regasification revenues | 66 | 66 | 199 | 196 | ||||||||||||
Other revenues | 17 | (10 | ) | 53 | 37 | |||||||||||
Total revenues from customers | 2,078 | 1,832 | 6,394 | 5,677 | ||||||||||||
Net derivative gains (losses) (1) | 64 | (57 | ) | 233 | (117 | ) | ||||||||||
Other (2) | 28 | 44 | 96 | 44 | ||||||||||||
Total revenues | $ | 2,170 | $ | 1,819 | $ | 6,723 | $ | 5,604 |
(1) |
(2) | Includes revenues from LNG vessel subcharters. See Note 11—Leases for additional information about our subleases. |
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CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Contract Assets and Liabilities
The following table shows our contract assets, which we classify as other non-current assets, net on our Consolidated Balance Sheets (in millions):
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Contract assets | $ | 12 | $ | — |
Contract assets represent our right to consideration for transferring goods or services to the customer under the terms of a sales contract when the associated consideration is not yet due. Changes in contract assets during the nine months ended September 30, 2019 were primarily attributable to revenue recognized due to the delivery of LNG under certain SPAs for which the associated consideration was not yet due.
The following table reflects the changes in our contract liabilities, which we classify as deferred revenue on our Consolidated Balance Sheets (in millions):
Nine Months Ended September 30, 2019 | ||||
Deferred revenues, beginning of period | $ | 139 | ||
Cash received but not yet recognized | 171 | |||
Revenue recognized from prior period deferral | (139 | ) | ||
Deferred revenues, end of period | $ | 171 |
Transaction Price Allocated to Future Performance Obligations
Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration which we have not yet recognized as revenue. The following table discloses the aggregate amount of the transaction price that is allocated to performance obligations that have not yet been satisfied as of September 30, 2019 and December 31, 2018:
September 30, 2019 | December 31, 2018 | |||||||||||
Unsatisfied Transaction Price (in billions) | Weighted Average Recognition Timing (years) (1) | Unsatisfied Transaction Price (in billions) | Weighted Average Recognition Timing (years) (1) | |||||||||
LNG revenues | $ | 107.5 | 11 | $ | 106.6 | 11 | ||||||
Regasification revenues | 2.4 | 5 | 2.6 | 6 | ||||||||
Total revenues | $ | 109.9 | $ | 109.2 |
(1) | The weighted average recognition timing represents an estimate of the number of years during which we shall have recognized half of the unsatisfied transaction price. |
We have elected the following exemptions which omit certain potential future sources of revenue from the table above:
(1) | We omit from the table above all performance obligations that are part of a contract that has an original expected duration of one year or less. |
(2) | We omit from the table above all variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation when that performance obligation qualifies as a series. The table above excludes substantially all variable consideration under our SPAs and TUAs. The amount of revenue from variable fees that is not included in the transaction price will vary based on the future prices of Henry Hub throughout the contract terms, to the extent customers elect to take delivery of their LNG, and adjustments to the consumer price index. Certain of our contracts contain additional variable consideration based on the outcome of contingent events and the movement of various indexes. We have not included such variable consideration in the transaction price to the extent the consideration is considered constrained due to the uncertainty of ultimate pricing and receipt. Approximately 47% and 55% of our LNG revenues from contracts with a duration of over one year during the three months ended September 30, 2019 and 2018, respectively, and approximately 52% and 55% of our LNG revenues from contracts with a duration of over |
27
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
one year during the nine months ended September 30, 2019 and 2018, respectively, were related to variable consideration received from customers. During each of the three and nine months ended September 30, 2019 and 2018, approximately 3% of our regasification revenues were related to variable consideration received from customers.
We have entered into contracts to sell LNG that are conditioned upon one or both of the parties achieving certain milestones such as reaching FID on a certain liquefaction Train, obtaining financing or achieving substantial completion of a Train and any related facilities. These contracts are considered completed contracts for revenue recognition purposes and are included in the transaction price above when the conditions are considered probable of being met.
NOTE 13—INCOME TAXES
We recorded an income tax benefit of $3 million and an income tax provision of $3 million during the three months ended September 30, 2019 and 2018, respectively, and an income tax provision of zero and $15 million during the nine months ended September 30, 2019 and 2018, respectively. Changes in the income tax recorded between comparative periods are primarily attributable to changes in the income earned and tax transfer pricing applied to our U.K. integrated marketing function.
The effective tax rates during the three and nine months ended September 30, 2019 and 2018 were lower than the 21% federal statutory rate during the 2019 and 2018 interim periods primarily as a result of maintaining a valuation allowance against our federal and state net deferred tax assets. Due to historical losses and other available evidence related to our ability to generate taxable income, we continue to maintain a valuation allowance against our federal and state net deferred tax assets at September 30, 2019.
NOTE 14—SHARE-BASED COMPENSATION
We have granted restricted stock shares, restricted stock units, performance stock units and phantom units to employees and non-employee directors under the 2011 Incentive Plan, as amended (the “2011 Plan”) and the 2015 Employee Inducement Incentive Plan.
For the nine months ended September 30, 2019, we granted 1.6 million restricted stock units and 0.2 million performance stock units at target performance under the 2011 Plan to certain employees. Restricted stock units are stock awards that vest over a service period of three years and entitle the holder to receive shares of our common stock upon vesting, subject to restrictions on transfer and to a risk of forfeiture if the recipient terminates employment with us prior to the lapse of the restrictions. Performance stock units provide for cliff vesting after a period of three years with payouts based on metrics dependent upon market and performance achieved over the period from January 1, 2019 through December 31, 2021 compared to pre-established performance targets. The settlement amounts of the awards are based on market and performance metrics which include cumulative distributable cash flow per share, and in certain circumstances, total shareholder return (“TSR”) of our common stock. Where applicable, the compensation for performance stock units is based on fair value assigned to the market metric of TSR using a Monte Carlo model upon grant, which remains constant through the vesting period, and a performance metric, which will vary due to changing estimates regarding the expected achievement of the performance metric of cumulative distributable cash flow per share. The number of shares that may be earned at the end of the vesting period ranges from 25% up to 300% of the target award amount if the threshold performance is met. Both restricted stock units and performance stock units will be settled in Cheniere common stock (on a one-for-one basis) and are classified as equity awards.
Total share-based compensation consisted of the following (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Share-based compensation costs, pre-tax: | ||||||||||||||||
Equity awards | $ | 33 | $ | 25 | $ | 94 | $ | 64 | ||||||||
Liability awards | 2 | 13 | 7 | 45 | ||||||||||||
Total share-based compensation | 35 | 38 | 101 | 109 | ||||||||||||
Capitalized share-based compensation | (2 | ) | (7 | ) | (7 | ) | (20 | ) | ||||||||
Total share-based compensation expense | $ | 33 | $ | 31 | $ | 94 | $ | 89 | ||||||||
Tax benefit associated with share-based compensation expense | $ | 2 | $ | 1 | $ | 3 | $ | 3 |
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CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 15—NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
Basic net income (loss) per share attributable to common stockholders (“EPS”) excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflects potential dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if the potential common shares had been issued. The dilutive effect of unvested stock is calculated using the treasury-stock method and the dilutive effect of convertible securities is calculated using the if-converted method.
The following table reconciles basic and diluted weighted average common shares outstanding for the three and nine months ended September 30, 2019 and 2018 (in millions, except per share data):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 256.0 | 247.2 | 256.8 | 241.9 | ||||||||||||
Dilutive unvested stock | — | 3.0 | — | 2.7 | ||||||||||||
Diluted | 256.0 | 250.2 | 256.8 | 244.6 | ||||||||||||
Basic net income (loss) per share attributable to common stockholders | $ | (1.25 | ) | $ | 0.26 | $ | (1.13 | ) | $ | 1.67 | ||||||
Diluted net income (loss) per share attributable to common stockholders | $ | (1.25 | ) | $ | 0.26 | $ | (1.13 | ) | $ | 1.65 |
Potentially dilutive securities that were not included in the diluted net income (loss) per share computations because their effects would have been anti-dilutive were as follows (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Unvested stock (1) | 3.9 | 2.0 | 3.9 | 2.3 | ||||||||
Convertible notes (2) | 42.2 | 17.3 | 42.2 | 17.1 | ||||||||
Total potentially dilutive common shares | 46.1 | 19.3 | 46.1 | 19.4 |
(1) | Does not include 0.6 million shares for each of the three and nine months ended September 30, 2019 and 0.4 million shares for each of the three and nine months ended September 30, 2018 of unvested stock because the performance conditions had not yet been satisfied as of September 30, 2019 and 2018, respectively. |
(2) | Includes number of shares in aggregate issuable upon conversion of the 2021 Cheniere Convertible Unsecured Notes and the 2045 Cheniere Convertible Senior Notes for all periods presented and the 2025 CCH HoldCo II Convertible Senior Notes upon the substantial completion of Train 2 of the CCL Project during the three months ended September 30, 2019. |
NOTE 16—SHARE REPURCHASE PROGRAM
On June 3, 2019, we announced that our Board authorized a 3-year, $1.0 billion share repurchase program. During the three months ended September 30, 2019, we repurchased an aggregate of 2.5 million shares of our common stock for $156 million, for a weighted average price per share of $62.99. During the nine months ended September 30, 2019, we repurchased an aggregate of 2.5 million shares of our common stock for $159 million, for a weighted average price per share of $63.09.
As of September 30, 2019, we had up to $841 million of the share repurchase program available. Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements. The timing and amount of any shares of our common stock that are repurchased under the share repurchase program will be determined by our management based on market conditions and other factors. The share repurchase program does not obligate
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CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
us to acquire any particular amount of common stock, and may be modified, suspended or discontinued at any time or from time to time at our discretion.
NOTE 17—COMMITMENTS AND CONTINGENCIES
We have various contractual obligations which are recorded as liabilities in our Consolidated Financial Statements. Other items, such as certain purchase commitments and other executed contracts which do not meet the definition of a liability as of September 30, 2019, are not recognized as liabilities but require disclosures in our Consolidated Financial Statements.
Legal Proceedings
We may in the future be involved as a party to various legal proceedings, which are incidental to the ordinary course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters.
Parallax Litigation
In 2015, our wholly owned subsidiary, Cheniere LNG Terminals, LLC (“CLNGT”), entered into discussions with Parallax Enterprises, LLC (“Parallax Enterprises”) regarding the potential joint development of two liquefaction plants in Louisiana (the “Potential Liquefaction Transactions”). While the parties negotiated regarding the Potential Liquefaction Transactions, CLNGT loaned Parallax Enterprises approximately $46 million, as reflected in a secured note dated April 23, 2015, as amended on June 30, 2015, September 30, 2015 and November 4, 2015 (the “Secured Note”). The Secured Note was secured by all assets of Parallax Enterprises and its subsidiary entities. On June 30, 2015, Parallax Enterprises’ parent entity, Parallax Energy LLC (“Parallax Energy”), executed a Pledge and Guarantee Agreement further securing repayment of the Secured Note by providing a parent guaranty and a pledge of all of the equity of Parallax Enterprises in satisfaction of the Secured Note (the “Pledge Agreement”). CLNGT and Parallax Enterprises never executed a definitive agreement to pursue the Potential Liquefaction Transactions. The Secured Note matured on December 11, 2015, and Parallax Enterprises failed to make payment. On February 3, 2016, CLNGT filed an action against Parallax Energy, Parallax Enterprises and certain of Parallax Enterprises’ subsidiary entities, styled Cause No. 4:16-cv-00286, Cheniere LNG Terminals, LLC v. Parallax Energy LLC, et al., in the United States District Court for the Southern District of Texas (the “Texas Federal Suit”). CLNGT asserted claims in the Texas Federal Suit for (1) recovery of all amounts due under the Secured Note and (2) declaratory relief establishing that CLNGT is entitled to enforce its rights under the Secured Note and Pledge Agreement in accordance with each instrument’s terms and that CLNGT has no obligations of any sort to Parallax Enterprises concerning the Potential Liquefaction Transactions. On March 11, 2016, Parallax Enterprises and the other defendants in the Texas Federal Suit moved to dismiss the suit for lack of subject matter jurisdiction. On August 2, 2016, the court denied the defendants’ motion to dismiss without prejudice and permitted the parties to pursue jurisdictional discovery.
On March 11, 2016, Parallax Enterprises filed a suit against us and CLNGT styled Civil Action No. 62-810, Parallax Enterprises LLP v. Cheniere Energy, Inc. and Cheniere LNG Terminals, LLC, in the 25th Judicial District Court of Plaquemines Parish, Louisiana (the “Louisiana Suit”), wherein Parallax Enterprises asserted claims for breach of contract, fraudulent inducement, negligent misrepresentation, detrimental reliance, unjust enrichment and violation of the Louisiana Unfair Trade Practices Act. Parallax Enterprises predicated its claims in the Louisiana Suit on an allegation that we and CLNGT breached a purported agreement to jointly develop the Potential Liquefaction Transactions. Parallax Enterprises sought $400 million in alleged economic damages and rescission of the Secured Note. On April 15, 2016, we and CLNGT removed the Louisiana Suit to the United States District Court for the Eastern District of Louisiana, which subsequently transferred the Louisiana Suit to the United States District Court for the Southern District of Texas, where it was assigned Civil Action No. 4:16-cv-01628 and transferred to the same judge presiding over the Texas Federal Suit for coordinated handling. On August 22, 2016, Parallax Enterprises voluntarily dismissed all claims asserted against CLNGT and us in the Louisiana Suit without prejudice to refiling.
On July 27, 2017, the Parallax entities named as defendants in the Texas Federal Suit reurged their motion to dismiss and simultaneously filed counterclaims against CLNGT and third party claims against us for breach of contract, breach of fiduciary duty, promissory estoppel, quantum meruit and fraudulent inducement of the Secured Note and Pledge Agreement, based on substantially the same factual allegations Parallax Enterprises made in the Louisiana Suit. These Parallax entities also simultaneously filed an action styled Cause No. 2017-49685, Parallax Enterprises, LLC, et al. v. Cheniere Energy, Inc., et al., in the 61st District Court of Harris County, Texas (the “Texas State Suit”), which asserts substantially the same claims these entities asserted in the Texas Federal Suit. On July 31, 2017, CLNGT withdrew its opposition to the dismissal of the Texas Federal Suit
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CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
without prejudice on jurisdictional grounds and the federal court subsequently dismissed the Texas Federal Suit without prejudice. We and CLNGT simultaneously filed an answer and counterclaims in the Texas State Suit, asserting the same claims CLNGT had previously asserted in the Texas Federal Suit. Additionally, CLNGT filed third party claims against Parallax principals Martin Houston, Christopher Bowen Daniels, Howard Candelet and Mark Evans, as well as Tellurian Investments, Inc., Driftwood LNG, LLC, Driftwood LNG Pipeline LLC and Tellurian Services LLC, formerly known as Parallax Services LLC, including claims for tortious interference with CLNGT’s collateral rights under the Secured Note and Pledge Agreement, fraudulent transfer, conspiracy/aiding and abetting. Discovery in the Texas State Suit is ongoing. Trial is currently set for February 2020.
On February 15, 2019, we filed an action with CLNGT against Charif Souki, our former Chairman of the Board and Chief Executive Officer, styled, Cause No. 2019-11529, Cheniere Energy, Inc. and Cheniere LNG Terminals, LLC v. Charif Souki, in the 55th District Court of Harris County, Texas, which asserts claims of breach of fiduciary duties, fraudulent transfer, tortious interference with CLNGT’s collateral rights under the Secured Note and Pledge Agreement and conspiracy/aiding and abetting. On April 29, 2019, the court consolidated the Souki matter with the earlier filed pending case against Parallax, Tellurian and the individual defendants in the Texas State Suit.
We do not expect that the resolution of any of the foregoing litigation will have a material adverse impact on our financial results.
NOTE 18—CUSTOMER CONCENTRATION
The following table shows customers with revenues of 10% or greater of total revenues from external customers and customers with accounts receivable balances of 10% or greater of total accounts receivable from external customers:
Percentage of Total Revenues from External Customers | Percentage of Accounts Receivable from External Customers | |||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | September 30, | December 31, | |||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||
Customer A | 14% | 17% | 17% | 18% | 11% | 21% | ||||||
Customer B | 10% | 15% | 11% | 15% | * | 14% | ||||||
Customer C | 13% | 15% | 12% | 20% | * | 18% | ||||||
Customer D | 10% | 18% | 12% | 13% | 11% | * | ||||||
Customer E | * | * | * | * | 11% | * |
* Less than 10%
NOTE 19—SUPPLEMENTAL CASH FLOW INFORMATION
The following table provides supplemental disclosure of cash flow information (in millions):
Nine Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
Cash paid during the period for interest on debt, net of amounts capitalized | $ | 771 | $ | 552 | ||||
Cash paid for income taxes | 22 | 10 | ||||||
Non-cash investing and financing activities: | ||||||||
Acquisition of non-controlling interest in Cheniere Holdings | — | 702 | ||||||
Acquisition of assets under capital lease | — | 30 |
The balance in property, plant and equipment, net funded with accounts payable and accrued liabilities was $511 million and $471 million as of September 30, 2019 and 2018, respectively.
See Note 11—Leases for our supplemental cash flow information related to our leases in 2019 following the adoption of ASC 842.
31
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 20—SUBSEQUENT EVENTS
In October 2019, CCH issued an aggregate principal amount of $475 million of 3.925% senior secured notes due 2039 to certain accounts managed by BlackRock Real Assets and certain accounts managed by MetLife Investment Management on a private placement basis in reliance on Section 4(a)(2) of the Securities Act.
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ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Information Regarding Forward-Looking Statements
This quarterly report contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical or present facts or conditions, included herein or incorporated herein by reference are “forward-looking statements.” Included among “forward-looking statements” are, among other things:
• | statements that we expect to commence or complete construction of our proposed LNG terminals, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions thereof, by certain dates, or at all; |
• | statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products; |
• | statements regarding any financing transactions or arrangements, or our ability to enter into such transactions; |
• | statements relating to the construction of our Trains and pipelines, including statements concerning the engagement of any EPC contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and anticipated costs related thereto; |
• | statements regarding any SPA or other agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total LNG regasification, natural gas liquefaction or storage capacities that are, or may become, subject to contracts; |
• | statements regarding counterparties to our commercial contracts, construction contracts, and other contracts; |
• | statements regarding our planned development and construction of additional Trains and pipelines, including the financing of such Trains or pipelines; |
• | statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities; |
• | statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections, or objectives, including anticipated revenues, capital expenditures, maintenance and operating costs and cash flows, any or all of which are subject to change; |
• | statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions; |
• | statements regarding marketing of volumes expected to be made available to our integrated marketing function; and |
• | any other statements that relate to non-historical or future information. |
All of these types of statements, other than statements of historical or present facts or conditions, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “achieve,” “anticipate,” “believe,” “contemplate,” “continue,” “estimate,” “expect,” “intend,” “plan,” “potential,” “predict,” “project,” “pursue,” “target,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this quarterly report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe that such estimates are reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond our control. In addition, assumptions may prove to be inaccurate. We caution that the forward-looking statements contained in this quarterly report are not guarantees of future performance and that such statements may not be realized or the forward-looking statements or events may not occur. Actual results may differ materially from those anticipated or implied in forward-looking statements as a result of a variety of factors described in this quarterly report and in the other reports and other information that we file with the SEC, including those discussed under “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2018. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than
33
as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.
Introduction
The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future. Our discussion and analysis includes the following subjects:
• | Overview of Business |
• | Overview of Significant Events |
• | Liquidity and Capital Resources |
• | Results of Operations |
• | Off-Balance Sheet Arrangements |
• | Summary of Critical Accounting Estimates |
• | Recent Accounting Standards |
Overview of Business
Cheniere, a Delaware corporation, is a Houston-based energy company primarily engaged in LNG-related businesses. We provide clean, secure and affordable energy to the world, while responsibly delivering a reliable, competitive and integrated source of LNG, in a safe and rewarding work environment. We own and operate the Sabine Pass LNG terminal in Louisiana through our ownership interest in and management agreements with Cheniere Partners, which is a publicly traded limited partnership that we created in 2007. As of September 30, 2019, we owned 100% of the general partner interest and 48.6% of the limited partner interest in Cheniere Partners. We also own and operate the Corpus Christi LNG terminal in Texas, which is wholly owned by us. The liquefaction of natural gas into LNG allows it to be shipped economically from the United States where natural gas is abundant and inexpensive to produce to our international customers in areas where natural gas demand and infrastructure exist.
The Sabine Pass LNG terminal is located in Cameron Parish, Louisiana, on the Sabine-Neches Waterway less than four miles from the Gulf Coast. Cheniere Partners, through its subsidiary SPL, is operating and constructing six natural gas liquefaction Trains (the “SPL Project”) at the Sabine Pass LNG terminal adjacent to the existing regasification facilities. Trains 1 through 5 are operational and Train 6 is under construction. Each Train is expected to have a nominal production capacity, which is prior to adjusting for planned maintenance, production reliability, potential overdesign and debottlenecking opportunities, of approximately 4.5 mtpa of LNG per Train. The Sabine Pass LNG terminal has operational regasification facilities owned by Cheniere Partners’ wholly owned subsidiary, SPLNG, that include pre-existing infrastructure of five LNG storage tanks with aggregate capacity of approximately 16.9 Bcfe, two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters and vaporizers with regasification capacity of approximately 4.0 Bcf/d. Cheniere Partners also owns a 94-mile pipeline through its wholly owned subsidiary, CTPL, that interconnects the Sabine Pass LNG terminal with a number of large interstate pipelines.
We are also operating and constructing a second natural gas liquefaction and export facility at the Corpus Christi LNG terminal near Corpus Christi, Texas, and operating a 23-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with several interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the liquefaction facilities, the “CCL Project”) through our wholly owned subsidiaries CCL and CCP, respectively. The CCL Project is being constructed in stages with the first phase being three Trains (“Phase 1”), three LNG storage tanks with aggregate capacity of approximately 10.1 Bcfe and two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters. The first stage (“Stage 1”) includes Trains 1 and 2, two LNG storage tanks, one complete marine berth and a second partial berth and all of the CCL Project’s necessary infrastructure facilities. The second stage (“Stage 2”) includes Train 3, one LNG storage tank and the completion of the second partial berth. Trains 1 and 2 are operational and Train 3 is under construction. Each Train is expected to have a nominal production capacity, which is prior to adjusting for planned maintenance, production reliability, potential overdesign and debottlenecking opportunities, of approximately 4.5 mtpa of LNG per Train.
34
We have contracted approximately 85% of the expected aggregate nominal production capacity from the SPL Project and the CCL Project (collectively, the “Liquefaction Projects”) on a long-term basis.
Additionally, separate from the CCH Group, we are developing an expansion of the Corpus Christi LNG terminal adjacent to the CCL Project (“Corpus Christi Stage 3”) and filed an application with FERC in June 2018 for seven midscale Trains with an expected aggregate nominal production capacity of approximately 9.5 mtpa and one LNG storage tank.
We have made an equity investment in Midship Holdings, LLC (“Midship Holdings”), which manages the business and affairs of Midship Pipeline Company, LLC (“Midship Pipeline”). Midship Pipeline is constructing a pipeline (the “Midship Project”) with expected capacity of up to 1.44 million Dekatherms per day that will connect new gas production in the Anadarko Basin to Gulf Coast markets, including markets serving the Liquefaction Projects. Construction of the Midship Project commenced in the first quarter of 2019.
We remain focused on expansion of our existing sites by leveraging existing infrastructure. We continue to consider development of other projects, including infrastructure projects in support of natural gas supply and LNG demand, which, among other things, will require acceptable commercial and financing arrangements before we can make a final investment decision (“FID”).
Overview of Significant Events
Our significant accomplishments since January 1, 2019 and through the filing date of this Form 10-Q include the following:
Strategic
• | In September 2019, our wholly owned subsidiaries CCL and CCL Stage III entered into an integrated production marketing (“IPM”) transaction with EOG Resources, Inc. (“EOG”) to purchase 140,000 MMBtu per day of natural gas, for a term of approximately 15 years beginning in early 2020, at a price based on the Platts Japan Korea Marker (“JKM”). |
• | In June 2019, our board of directors (the “Board”) appointed Michele A. Evans to serve as a member of the Board. Ms. Evans was also appointed to the Audit Committee and the Governance and Nominating Committee of the Board. |
• | In May 2019, our wholly owned subsidiary CCL Stage III entered into an IPM transaction with Apache Corporation to purchase 140,000 MMBtu per day of natural gas, for a term of approximately 15 years, at a price based on international LNG indices, net of a fixed liquefaction fee and certain costs incurred by Cheniere. |
• | In May 2019, the board of directors of the general partner of Cheniere Partners made a positive FID with respect to Train 6 of the SPL Project and issued a full notice to proceed with construction to Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) in June 2019. |
• | In March 2019, we received a positive Environmental Assessment from the FERC relating to Corpus Christi Stage 3 and anticipate receiving all remaining necessary regulatory approvals for the project by the end of 2019. |
• | In February 2019, Midship Pipeline, in which we hold an indirect equity interest, issued full notice to proceed to construct the Midship natural gas pipeline and related compression and interconnect facilities following receipt of final Notice to Proceed from the FERC and obtaining financing to construct the Midship Project. |
Operational
• | As of October 25, 2019, over 850 cumulative LNG cargoes totaling approximately 60 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Projects. |
• | In August 2019, substantial completion of Train 2 of the CCL Project was achieved. |
• | In June 2019, first LNG production from Train 2 of the CCL Project occurred, and the first commissioning cargo from Train 2 was exported. |
• | In February 2019 and March 2019, CCL and SPL achieved substantial completion of Train 1 of the CCL Project and Train 5 of the SPL Project, respectively, and commenced operating activities. |
Financial
• | In October 2019, CCH issued an aggregate principal amount of $475 million of 3.925% Senior Secured Notes due 2039 pursuant to a note purchase agreement with certain accounts managed by BlackRock Real Assets and certain accounts |
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managed by MetLife Investment Management, to prepay a portion of the outstanding indebtedness under the amended and restated CCH Credit Facility (the “CCH Credit Facility”).
• | In September 2019, CCH issued an aggregate principal amount of $727 million of 4.80% Senior Secured Notes due 2039 (the “4.80% CCH Senior Notes”) pursuant to a note purchase agreement originally entered into in June 2019 (“CCH Note Purchase Agreement”) with Allianz Global Investors GmbH, to prepay a portion of the outstanding indebtedness under the CCH Credit Facility. |
• | In September 2019, Fitch Ratings (“Fitch”) and S&P Global Ratings each assigned an investment grade rating of BBB- to CCH’s senior secured debt, and Fitch assigned an investment grade issuer default rating of BBB- to CCH. In October 2019, Moody’s Investors Service upgraded its rating of CCH’s senior secured debt from Ba2 to Ba1 (Positive Outlook). |
• | In September 2019, Cheniere Partners issued an aggregate principal amount of $1.5 billion of 4.500% Senior Notes due 2029 (the “2029 CQP Senior Notes”) to prepay the outstanding balance under the $750 million term loan under Cheniere Partners’ credit facilities (the “2019 CQP Credit Facilities”), which were entered into in May 2019, and for general corporate purposes, including funding future capital expenditures in connection with the construction of Train 6 at the SPL Project. After applying the proceeds of this offering, only a $750 million revolving credit facility, which is currently undrawn, remains as part of the 2019 CQP Credit Facilities. |
• | In September 2019, the date of first commercial delivery was reached under the 20-year SPAs with Centrica plc and Total Gas & Power North America, Inc. (“Total”) relating to Train 5 of the SPL Project. |
• | In June 2019, we announced a capital allocation framework which prioritizes investments in the growth of our liquefaction platform, improvement of consolidated leverage metrics, and a return of excess capital to shareholders under a three-year, $1.0 billion share repurchase program. We commenced share repurchase activity in the second quarter of 2019 and commenced prepayment of outstanding debt in the third quarter of 2019. |
• | In June 2019, the date of first commercial delivery was reached under the 20-year SPAs with Endesa S.A. and PT Pertamina (Persero) relating to Train 1 of the CCL Project. |
• | In March 2019, the date of first commercial delivery was reached under the 20-year SPA with BG Gulf Coast LNG, LLC relating to Train 4 of the SPL Project. |
Liquidity and Capital Resources
Although results are consolidated for financial reporting, Cheniere, Cheniere Partners, SPL and the CCH Group operate with independent capital structures. We expect the cash needs for at least the next twelve months will be met for each of these independent capital structures as follows:
• | SPL through project debt and borrowings, operating cash flows and equity contributions from Cheniere Partners; |
• | Cheniere Partners through operating cash flows from SPLNG, SPL and CTPL and debt or equity offerings; |
• | CCH Group through operating cash flows from CCL and CCP, project debt and borrowings and equity contributions from Cheniere; and |
• | Cheniere through project financing, existing unrestricted cash, debt and equity offerings by us or our subsidiaries, operating cash flows, services fees from our subsidiaries and distributions from our investment in Cheniere Partners. |
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The following table provides a summary of our liquidity position at September 30, 2019 and December 31, 2018 (in millions):
September 30, | December 31, | ||||||
2019 | 2018 | ||||||
Cash and cash equivalents (1) | $ | 2,539 | $ | 981 | |||
Restricted cash designated for the following purposes: | |||||||
SPL Project | 185 | 756 | |||||
Cheniere Partners and cash held by guarantor subsidiaries | — | 785 | |||||
CCL Project | 132 | 289 | |||||
Other | 261 | 345 | |||||
Available commitments under the following credit facilities: | |||||||
$1.2 billion SPL Working Capital Facility (“SPL Working Capital Facility”) | 786 | 775 | |||||
2019 CQP Credit Facilities | 750 | — | |||||
$2.8 billion Cheniere Partners’ Credit Facilities (“2016 CQP Credit Facilities”) | — | 115 | |||||
CCH Credit Facility | — | 982 | |||||
$1.2 billion CCH Working Capital Facility (“CCH Working Capital Facility”) | 617 | 716 | |||||
$1.25 billion Cheniere Revolving Credit Facility (“Cheniere Revolving Credit Facility”) | 374 | 1,250 |
(1) | Amounts presented include balances held by our consolidated variable interest entity (“VIE”), Cheniere Partners as discussed in Note 8— Non-controlling Interest and Variable Interest Entity of our Notes to Consolidated Financial Statements in this quarterly report. As of September 30, 2019 and December 31, 2018, assets of Cheniere Partners, which are included in our Consolidated Balance Sheets, included $1.7 billion and zero, respectively, of cash and cash equivalents. |
For additional information regarding our debt agreements, see Note 10—Debt of our Notes to Consolidated Financial Statements in this quarterly report and Note 12—Debt of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2018.
Cheniere
Convertible Notes
In November 2014, we issued an aggregate principal amount of $1.0 billion of Convertible Unsecured Notes due 2021 (the “2021 Cheniere Convertible Unsecured Notes”). The 2021 Cheniere Convertible Unsecured Notes are convertible at the option of the holder into our common stock at the then applicable conversion rate, provided that the closing price of our common stock is greater than or equal to the conversion price on the date of conversion. In March 2015, we issued $625 million aggregate principal amount of 4.25% Convertible Senior Notes due 2045 (the “2045 Cheniere Convertible Senior Notes”). We have the right, at our option, at any time after March 15, 2020, to redeem all or any part of the 2045 Cheniere Convertible Senior Notes at a redemption price equal to the accreted amount of the 2045 Cheniere Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to such redemption date. We have the option to satisfy the conversion obligation for the 2021 Cheniere Convertible Unsecured Notes and the 2045 Cheniere Convertible Senior Notes with cash, common stock or a combination thereof.
Cheniere Revolving Credit Facility
In December 2018, we amended and restated the Cheniere Revolving Credit Facility to increase total commitments under the Cheniere Revolving Credit Facility from $750 million to $1.25 billion. The Cheniere Revolving Credit Facility is intended to fund, through loans and letters of credit, equity capital contributions to CCH HoldCo II and its subsidiaries for the development of the CCL Project and, provided that certain conditions are met, for general corporate purposes.
The Cheniere Revolving Credit Facility matures on December 13, 2022 and contains representations, warranties and affirmative and negative covenants customary for companies like us with lenders of the type participating in the Cheniere Revolving Credit Facility that limit our ability to make restricted payments, including distributions, unless certain conditions are satisfied, as well as limitations on indebtedness, guarantees, hedging, liens, investments and affiliate transactions. Under the Cheniere Revolving Credit Facility, we are required to ensure that the sum of our unrestricted cash and the amount of undrawn commitments under the Cheniere Revolving Credit Facility is at least equal to the lesser of (1) 20% of the commitments under the Cheniere Revolving Credit Facility and (2) $200 million (the “Liquidity Covenant”).
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From and after the time at which certain specified conditions are met (the “Trigger Point”), we will have increased flexibility under the Cheniere Revolving Credit Facility to, among other things, (1) make restricted payments and (2) raise incremental commitments. The Trigger Point will occur once (1) completion has occurred for each of Train 1 of the CCL Project (as defined in the CCH Indenture) and Train 5 of the SPL Project (as defined in SPL’s common terms agreement), which has occurred in February 2019 and March 2019, respectively; (2) the aggregate principal amount of outstanding loans plus drawn and unreimbursed letters of credit under the Cheniere Revolving Credit Facility is less than or equal to 10% of aggregate commitments under the Cheniere Revolving Credit Facility and (3) we elect on a go-forward basis to be governed by a non-consolidated leverage ratio covenant not to exceed 5.75:1.00 (the “Springing Leverage Covenant”), which following such election will apply at any time that the aggregate principal amount of outstanding loans plus drawn and unreimbursed letters of credit under the Cheniere Revolving Credit Facility is greater than 30% of aggregate commitments under the Cheniere Revolving Credit Facility. Following the Trigger Point, at any time that the Springing Leverage Covenant is in effect, the Liquidity Covenant will not apply.
The Cheniere Revolving Credit Facility is secured by a first priority security interest (subject to permitted liens and other customary exceptions) in substantially all of our assets, including our interests in our direct subsidiaries (excluding CCH HoldCo II and certain other subsidiaries).
Cash Receipts from Subsidiaries
Our ownership interest in the Sabine Pass LNG terminal is held through Cheniere Partners. As of September 30, 2019, we owned a 48.6% limited partner interest in Cheniere Partners in the form of 104.5 million common units and 135.4 million subordinated units. We also own 100% of the general partner interest and the incentive distribution rights in Cheniere Partners. We are eligible to receive quarterly equity distributions from Cheniere Partners related to our ownership interests and our incentive distribution rights.
We also receive fees for providing management services to some of our subsidiaries. We received $79 million and $57 million in total service fees from these subsidiaries during each of the nine months ended September 30, 2019 and 2018, respectively.
Share Repurchase Program
On June 3, 2019, we announced that our Board authorized a 3-year, $1.0 billion share repurchase program. During the three months ended September 30, 2019, we repurchased an aggregate of 2.5 million shares of our common stock for $156 million, for a weighted average price per share of $62.99. During the nine months ended September 30, 2019, we repurchased an aggregate of 2.5 million shares of our common stock for $159 million, for a weighted average price per share of $63.09. As of September 30, 2019, we had up to $841 million of the share repurchase program available. Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements. The timing and amount of any shares of our common stock that are repurchased under the share repurchase program will be determined by our management based on market conditions and other factors. The share repurchase program does not obligate us to acquire any particular amount of common stock, and may be modified, suspended or discontinued at any time or from time to time at our discretion.
Cheniere Partners
CQP Senior Notes
In September 2019, Cheniere Partners issued an aggregate principal amount of $1.5 billion of the 2029 CQP Senior Notes, which in addition to the existing $1.5 billion of 5.250% Senior Notes due 2025 (the “2025 CQP Senior Notes”) and $1.1 billion of 5.625% Senior Notes due 2026 (the “2026 CQP Senior Notes”), are jointly and severally guaranteed by each of Cheniere Partners’ subsidiaries other than SPL and, subject to certain conditions governing its guarantee, Sabine Pass LP (the “CQP Guarantors”). The 2025 CQP Senior Notes, 2026 CQP Senior Notes and 2029 CQP Senior Notes (collectively, the “CQP Senior Notes”) are governed by the same base indenture (the “CQP Base Indenture”). The 2025 CQP Senior Notes are further governed by the First Supplemental Indenture (together with the CQP Base Indenture, the “2025 CQP Notes Indenture”), the 2026 CQP Senior Notes are further governed by the Second Supplemental Indenture (together with the CQP Base Indenture, the “2026 CQP Notes Indenture”) and the 2029 CQP Senior Notes are further governed by the Third Supplemental Indenture (together with the CQP Base Indenture, the “2029 CQP Notes Indenture”). The 2025 CQP Notes Indenture, the 2026 CQP Notes Indenture and the 2029 CQP Notes Indenture contain customary terms and events of default and certain covenants that, among other things, limit
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the ability of Cheniere Partners and the CQP Guarantors to incur liens and sell assets, enter into transactions with affiliates, enter into sale-leaseback transactions and consolidate, merge or sell, lease or otherwise dispose of all or substantially all of the applicable entity’s properties or assets.
At any time prior to October 1, 2020 for the 2025 CQP Senior Notes, October 1, 2021 for the 2026 CQP Senior Notes and October 1, 2024 for the 2029 CQP Senior Notes, Cheniere Partners may redeem all or a part of the applicable CQP Senior Notes at a redemption price equal to 100% of the aggregate principal amount of the CQP Senior Notes redeemed, plus the “applicable premium” set forth in the respective indentures governing the CQP Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior to October 1, 2020 for the 2025 CQP Senior Notes, October 1, 2021 for the 2026 CQP Senior Notes and October 1, 2024 for the 2029 CQP Senior Notes, Cheniere Partners may redeem up to 35% of the aggregate principal amount of the CQP Senior Notes with an amount of cash not greater than the net cash proceeds from certain equity offerings at a redemption price equal to 105.250% of the aggregate principal amount of the 2025 CQP Senior Notes, 105.625% of the aggregate principal amount of the 2026 CQP Senior Notes and 104.5% of the aggregate principal amount of the 2029 CQP Senior Notes redeemed, plus accrued and unpaid interest, if any, to the date of redemption. Cheniere Partners also may at any time on or after October 1, 2020 through the maturity date of October 1, 2025 for the 2025 CQP Senior Notes, October 1, 2021 through the maturity date of October 1, 2026 for the 2026 CQP Senior Notes and October 1, 2024 through the maturity date of October 1, 2029 for the 2029 CQP Senior Notes, redeem the CQP Senior Notes, in whole or in part, at the redemption prices set forth in the respective indentures governing the CQP Senior Notes.
The CQP Senior Notes are Cheniere Partners’ senior obligations, ranking equally in right of payment with Cheniere Partners’ other existing and future unsubordinated debt and senior to any of its future subordinated debt. In the event that the aggregate amount of Cheniere Partners’ secured indebtedness and the secured indebtedness of the CQP Guarantors (other than the CQP Senior Notes or any other series of notes issued under the CQP Base Indenture) outstanding at any one time exceeds the greater of (1) $1.5 billion and (2) 10% of net tangible assets, the CQP Senior Notes will be secured to the same extent as such obligations under the 2019 CQP Credit Facilities. The obligations under the 2019 CQP Credit Facilities are secured on a first-priority basis (subject to permitted encumbrances) with liens on (1) substantially all the existing and future tangible and intangible assets and rights of Cheniere Partners and the CQP Guarantors and equity interests in the CQP Guarantors (except, in each case, for certain excluded properties set forth in the 2019 CQP Credit Facilities) and (2) substantially all of the real property of SPLNG (except for excluded properties referenced in the 2019 CQP Credit Facilities). The liens securing the CQP Senior Notes, if applicable, will be shared equally and ratably (subject to permitted liens) with the holders of other senior secured obligations, which include the 2019 CQP Credit Facilities obligations and any future additional senior secured debt obligations.
2016 CQP Credit Facilities
In May 2019, the remaining commitments under the 2016 CQP Credit Facilities were terminated.
2019 CQP Credit Facilities
In May 2019, Cheniere Partners entered into the 2019 CQP Credit Facilities, which consisted of the $750 million term loan (“CQP Term Facility”), which was prepaid and terminated upon issuance of the 2029 CQP Senior Notes in September 2019, and the $750 million revolving credit facility (“CQP Revolving Facility”). Borrowings under the 2019 CQP Credit Facilities will be used to fund the development and construction of Train 6 of the SPL Project and for general corporate purposes, subject to a sublimit, and the 2019 CQP Credit Facilities are also available for the issuance of letters of credit.
Loans under the 2019 CQP Credit Facilities accrue interest at a variable rate per annum equal to LIBOR or the base rate (equal to the highest of the prime rate, the federal funds effective rate, as published by the Federal Reserve Bank of New York, plus 0.50%, and the adjusted one-month LIBOR plus 1.0%), plus the applicable margin. Under the CQP Revolving Facility, the applicable margin for LIBOR loans is 1.25% to 2.125% per annum, and the applicable margin for base rate loans is 0.25% to 1.125% per annum, in each case depending on the then-current rating of Cheniere Partners. Interest on LIBOR loans is due and payable at the end of each applicable LIBOR period (and at the end of every three-month period within the LIBOR period, if any), and interest on base rate loans is due and payable at the end of each calendar quarter.
Cheniere Partners pays a commitment fee equal to an annual rate of 30% of the margin for LIBOR loans multiplied by the average daily amount of the undrawn commitment, payable quarterly in arrears.
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The 2019 CQP Credit Facilities mature on May 29, 2024. Any outstanding balance may be repaid, in whole or in part, at any time without premium or penalty, except for interest rate breakage costs. The 2019 CQP Credit Facilities contain conditions precedent for extensions of credit, as well as customary affirmative and negative covenants, and limit Cheniere Partners’ ability to make restricted payments, including distributions, to once per fiscal quarter and one true-up per fiscal quarter as long as certain conditions are satisfied.
The 2019 CQP Credit Facilities are unconditionally guaranteed and secured by a first priority lien (subject to permitted encumbrances) on substantially all of Cheniere Partners’ and the CQP Guarantors’ existing and future tangible and intangible assets and rights and equity interests in the CQP Guarantors (except, in each case, for certain excluded properties set forth in the 2019 CQP Credit Facilities).
Sabine Pass LNG Terminal
Liquefaction Facilities
We are in various stages of constructing and operating the SPL Project at the Sabine Pass LNG terminal adjacent to the existing regasification facilities. We have received authorization from the FERC to site, construct and operate Trains 1 through 6. We have achieved substantial completion of Trains 1, 2, 3, 4 and 5 of the SPL Project and commenced operating activities in May 2016, September 2016, March 2017, October 2017 and March 2019, respectively. The following table summarizes the status of Train 6 of the SPL Project as of September 30, 2019:
SPL Train 6 | |||
Overall project completion percentage | 38.1% | ||
Completion percentage of: | |||
Engineering | 83.8% | ||
Procurement | 54.1% | ||
Subcontract work | 34.3% | ||
Construction | 5.5% | ||
Date of expected substantial completion | 1H 2023 |
The following orders have been issued by the DOE authorizing the export of domestically produced LNG by vessel from the Sabine Pass LNG terminal:
• | Trains 1 through 4—FTA countries for a 30-year term, which commenced on May 15, 2016, and non-FTA countries for a 20-year term, which commenced on June 3, 2016, in an amount up to a combined total of the equivalent of 16 mtpa (approximately 803 Bcf/yr of natural gas). |
• | Trains 1 through 4—FTA countries for a 25-year term and non-FTA countries for a 20-year term in an amount up to a combined total of the equivalent of approximately 203 Bcf/yr of natural gas (approximately 4 mtpa). |
• | Trains 5 and 6—FTA countries and non-FTA countries for a 20-year term, in an amount up to a combined total of 503.3 Bcf/yr of natural gas (approximately 10 mtpa). |
In each case, the terms of these authorizations begin on the earlier of the date of first export thereunder or the date specified in the particular order, which ranges from five to 10 years from the date the order was issued. In addition, SPL received an order providing for a three-year makeup period with respect to each of the non-FTA orders for LNG volumes SPL was authorized but unable to export during any portion of the initial 20-year export period of such order.
In January 2018, the DOE issued orders authorizing SPL to export domestically produced LNG by vessel from the Sabine Pass LNG terminal to FTA countries and non-FTA countries over a two-year period commencing January 2018, in an aggregate amount up to the equivalent of 600 Bcf of natural gas (however, exports under this order, when combined with exports under the orders above, may not exceed 1,509 Bcf/yr).
Customers
SPL has entered into fixed price SPAs generally with terms of at least 20 years (plus extension rights) with eight third parties for Trains 1 through 6 of the SPL Project, including an agreement anticipated to be assigned from Cheniere Marketing. Under these SPAs, the customers will purchase LNG from SPL for a price consisting of a fixed fee per MMBtu of LNG (a portion of
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which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG equal to approximately 115% of Henry Hub. In certain circumstances, the customers may elect to cancel or suspend deliveries of LNG cargoes, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. We refer to the fee component that is applicable regardless of a cancellation or suspension of LNG cargo deliveries under the SPAs as the fixed fee component of the price under SPL’s SPAs. We refer to the fee component that is applicable only in connection with LNG cargo deliveries as the variable fee component of the price under SPL’s SPAs. The variable fees under SPL’s SPAs were sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation related to, and operating and maintenance costs to produce, the LNG to be sold under each such SPA. The SPAs and contracted volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery of a specified Train.
In aggregate, the annual fixed fee portion to be paid by the third-party SPA customers is approximately $2.3 billion for Trains 1 through 4 and increasing to $2.9 billion upon the date of first commercial delivery of Train 5, which occurred in September 2019. After giving effect to an SPA that Cheniere has committed to provide to SPL by the end of 2020, the annual fixed fee portion to be paid by the third-party SPA customers would increase to at least $3.3 billion upon the date of first commercial delivery of Train 6.
In addition, Cheniere Marketing has agreements with SPL to purchase: (1) at Cheniere Marketing’s option, any LNG produced by SPL in excess of that required for other customers and (2) up to 20 cargoes totaling approximately 70 million MMBtu scheduled for delivery between May 3 and December 31, 2019 at a price of 115% of Henry Hub plus $2.00 per MMBtu.
Natural Gas Transportation, Storage and Supply
To ensure SPL is able to transport adequate natural gas feedstock to the Sabine Pass LNG terminal, it has entered into transportation precedent and other agreements to secure firm pipeline transportation capacity with CTPL and third-party pipeline companies. SPL has entered into firm storage services agreements with third parties to assist in managing variability in natural gas needs for the SPL Project. SPL has also entered into enabling agreements and long-term natural gas supply contracts with third parties in order to secure natural gas feedstock for the SPL Project. As of September 30, 2019, SPL had secured up to approximately 4,108 TBtu of natural gas feedstock through long-term and short-term natural gas supply contracts that range up to ten years.
Construction
SPL entered into lump sum turnkey contracts with Bechtel for the engineering, procurement and construction of Trains 1 through 6 of the SPL Project, under which Bechtel charges a lump sum for all work performed and generally bears project cost risk unless certain specified events occur, in which case Bechtel may cause SPL to enter into a change order, or SPL agrees with Bechtel to a change order.
The total contract price of the EPC contract for Train 6 of the SPL Project is approximately $2.5 billion, including estimated costs for an optional third marine berth.
Regasification Facilities
The Sabine Pass LNG terminal has operational regasification capacity of approximately 4.0 Bcf/d and aggregate LNG storage capacity of approximately 16.9 Bcfe. Approximately 2.0 Bcf/d of the regasification capacity at the Sabine Pass LNG terminal has been reserved under two long-term third-party TUAs, under which SPLNG’s customers are required to pay fixed monthly fees, whether or not they use the LNG terminal. Each of Total and Chevron U.S.A. Inc. (“Chevron”) has reserved approximately 1.0 Bcf/d of regasification capacity and is obligated to make monthly capacity payments to SPLNG aggregating approximately $125 million annually, prior to inflation adjustments, for 20 years that commenced in 2009. Total S.A. has guaranteed Total’s obligations under its TUA up to $2.5 billion, subject to certain exceptions, and Chevron Corporation has guaranteed Chevron’s obligations under its TUA up to 80% of the fees payable by Chevron.
The remaining approximately 2.0 Bcf/d of capacity has been reserved under a TUA by SPL. SPL is obligated to make monthly capacity payments to SPLNG aggregating approximately $250 million annually, prior to inflation adjustments, continuing until at least May 2036. SPL entered into a partial TUA assignment agreement with Total, whereby upon substantial completion of Train 5 of the SPL Project, SPL gained access to substantially all of Total’s capacity and other services provided under Total’s
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TUA with SPLNG. This agreement provides SPL with additional berthing and storage capacity at the Sabine Pass LNG terminal that may be used to provide increased flexibility in managing LNG cargo loading and unloading activity, permit SPL to more flexibly manage its LNG storage capacity and accommodate the development of Train 6. Notwithstanding any arrangements between Total and SPL, payments required to be made by Total to SPLNG will continue to be made by Total to SPLNG in accordance with its TUA. During the three months ended September 30, 2019 and 2018, SPL recorded $32 million and $7.5 million, respectively, and during the nine months ended September 30, 2019 and 2018, SPL recorded $72 million and $23 million, respectively, as operating and maintenance expense under this partial TUA assignment agreement.
Under each of these TUAs, SPLNG is entitled to retain 2% of the LNG delivered to the Sabine Pass LNG terminal.
Capital Resources
We currently expect that SPL’s capital resources requirements with respect to the SPL Project will be financed through project debt and borrowings, cash flows under the SPAs and equity contributions from Cheniere Partners. We believe that with the net proceeds of borrowings, available commitments under the SPL Working Capital Facility, 2019 CQP Credit Facilities, cash flows from operations and equity contributions from Cheniere Partners, SPL will have adequate financial resources available to meet its currently anticipated capital, operating and debt service requirements with respect to Trains 1 through 6 of the SPL Project. SPL began generating cash flows from operations from the SPL Project in May 2016, when Train 1 achieved substantial completion and initiated operating activities. Trains 2, 3, 4 and 5 subsequently achieved substantial completion in September 2016, March 2017, October 2017 and March 2019, respectively. We realized offsets to LNG terminal costs of $74 million in the nine months ended September 30, 2019 that were related to the sale of commissioning cargoes because these amounts were earned or loaded prior to the start of commercial operations of Train 5 of the SPL Project during the testing phase for its construction. We did not realize any offsets to LNG terminal costs in the three months ended September 30, 2019 and in the three and nine months ended September 30, 2018. Additionally, SPLNG generates cash flows from the TUAs, as discussed above.
The following table provides a summary of our capital resources from borrowings and available commitments for the Sabine Pass LNG Terminal, excluding equity contributions to our subsidiaries and cash flows from operations (as described in Sources and Uses of Cash), at September 30, 2019 and December 31, 2018 (in millions):
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Senior notes (1) | $ | 17,750 | $ | 16,250 | ||||
Credit facilities outstanding balance (2) | — | — | ||||||
Letters of credit issued (3) | 414 | 425 | ||||||
Available commitments under credit facilities (3) | 1,536 | 775 | ||||||
Total capital resources from borrowings and available commitments (4) | $ | 19,700 | $ | 17,450 |
(1) | Includes SPL’s 5.625% Senior Secured Notes due 2021, 6.25% Senior Secured Notes due 2022, 5.625% Senior Secured Notes due 2023, 5.75% Senior Secured Notes due 2024, 5.625% Senior Secured Notes due 2025, 5.875% Senior Secured Notes due 2026 (the “2026 SPL Senior Notes”), 5.00% Senior Secured Notes due 2027 (the “2027 SPL Senior Notes”), 4.200% Senior Secured Notes due 2028 (the “2028 SPL Senior Notes”) and 5.00% Senior Secured Notes due 2037 (the “2037 SPL Senior Notes”) (collectively, the “SPL Senior Notes”) and CQP Senior Notes. |
(2) | Includes outstanding balances under the SPL Working Capital Facility and 2019 CQP Credit Facilities, inclusive of any portion of the 2019 CQP Credit Facilities that may be used for general corporate purposes. |
(3) | Consists of SPL Working Capital Facility and 2019 CQP Credit Facilities. Balance at December 31, 2018 did not include the letters of credit issued or available commitments under the terminated 2016 CQP Credit Facilities, which were not specifically for the Sabine Pass LNG Terminal. |
(4) | Does not include Cheniere’s additional borrowings from the 2021 Cheniere Convertible Unsecured Notes and the 2045 Cheniere Convertible Senior Notes, which may be used for the Sabine Pass LNG Terminal. |
For additional information regarding our debt agreements related to the Sabine Pass LNG Terminal, see Note 10—Debt of our Notes to Consolidated Financial Statements in this quarterly report and Note 12—Debt of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2018.
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SPL Senior Notes
The SPL Senior Notes are secured on a pari passu first-priority basis by a security interest in all of the membership interests in SPL and substantially all of SPL’s assets.
At any time prior to three months before the respective dates of maturity for each series of the SPL Senior Notes (except for the 2026 SPL Senior Notes, 2027 SPL Senior Notes, 2028 SPL Senior Notes and 2037 SPL Senior Notes, in which case the time period is six months before the respective dates of maturity), SPL may redeem all or part of such series of the SPL Senior Notes at a redemption price equal to the “make-whole” price (except for the 2037 SPL Senior Notes, in which case the redemption price is equal to the “optional redemption” price) set forth in the respective indentures governing the SPL Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption. SPL may also, at any time within three months of the respective maturity dates for each series of the SPL Senior Notes (except for the 2026 SPL Senior Notes, 2027 SPL Senior Notes, 2028 SPL Senior Notes and 2037 SPL Senior Notes, in which case the time period is within six months of the respective dates of maturity), redeem all or part of such series of the SPL Senior Notes at a redemption price equal to 100% of the principal amount of such series of the SPL Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.
Both the indenture governing the 2037 SPL Senior Notes (the “2037 SPL Senior Notes Indenture”) and the common indenture governing the remainder of the SPL Senior Notes (the “SPL Indenture”) include restrictive covenants. SPL may incur additional indebtedness in the future, including by issuing additional notes, and such indebtedness could be at higher interest rates and have different maturity dates and more restrictive covenants than the current outstanding indebtedness of SPL, including the SPL Senior Notes and the SPL Working Capital Facility. Under the 2037 SPL Senior Notes Indenture and the SPL Indenture, SPL may not make any distributions until, among other requirements, deposits are made into debt service reserve accounts as required and a debt service coverage ratio test of 1.25:1.00 is satisfied. Semi-annual principal payments for the 2037 SPL Senior Notes are due on March 15 and September 15 of each year beginning September 15, 2025.
SPL Working Capital Facility
In September 2015, SPL entered into the SPL Working Capital Facility, which is intended to be used for loans to SPL (“SPL Working Capital Loans”), the issuance of letters of credit on behalf of SPL, as well as for swing line loans to SPL (“SPL Swing Line Loans”), primarily for certain working capital requirements related to developing and placing into operation the SPL Project. SPL may, from time to time, request increases in the commitments under the SPL Working Capital Facility of up to $760 million and, upon the completion of the debt financing of Train 6 of the SPL Project, request an incremental increase in commitments of up to an additional $390 million. As of September 30, 2019 and December 31, 2018, SPL had $786 million and $775 million of available commitments and $414 million and $425 million aggregate amount of issued letters of credit under the SPL Working Capital Facility, respectively. SPL did not have any outstanding borrowings under the SPL Working Capital Facility as of both September 30, 2019 and December 31, 2018.
The SPL Working Capital Facility matures on December 31, 2020, and the outstanding balance may be repaid, in whole or in part, at any time without premium or penalty upon three business days’ notice. Loans deemed made in connection with a draw upon a letter of credit have a term of up to one year. SPL Swing Line Loans terminate upon the earliest of (1) the maturity date or earlier termination of the SPL Working Capital Facility, (2) the date 15 days after such SPL Swing Line Loan is made and (3) the first borrowing date for a SPL Working Capital Loan or SPL Swing Line Loan occurring at least three business days following the date the SPL Swing Line Loan is made. SPL is required to reduce the aggregate outstanding principal amount of all SPL Working Capital Loans to zero for a period of five consecutive business days at least once each year.
The SPL Working Capital Facility contains conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. The obligations of SPL under the SPL Working Capital Facility are secured by substantially all of the assets of SPL as well as all of the membership interests in SPL on a pari passu basis with the SPL Senior Notes.
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Corpus Christi LNG Terminal
Liquefaction Facilities
We are in various stages of constructing and operating the CCL Project at the Corpus Christi LNG terminal. We have received authorization from the FERC to site, construct and operate Stages 1 and 2 of the CCL Project. We achieved substantial completion of Trains 1 and 2 of the CCL Project and commenced operating activities in February 2019 and August 2019, respectively. The following table summarizes the overall project status of Stage 2 of the CCL Project as of September 30, 2019:
CCL Stage 2 | |||
Overall project completion percentage | 68.6% | ||
Completion percentage of: | |||
Engineering | 96.5% | ||
Procurement | 98.2% | ||
Subcontract work | 17.2% | ||
Construction | 37.1% | ||
Expected date of substantial completion | Train 3 | 1H 2021 |
Separate from the CCH Group, we are also developing Corpus Christi Stage 3, adjacent to the CCL Project. We filed an application with the FERC in June 2018 for seven midscale Trains with an expected aggregate nominal production capacity of approximately 9.5 mtpa and one LNG storage tank.
The following orders have been issued by the DOE authorizing the export of domestically produced LNG by vessel from the Corpus Christi LNG terminal:
• | CCL Project—FTA countries for a 25-year term and to non-FTA countries for a 20-year term up to a combined total of the equivalent of 767 Bcf/yr (approximately 15 mtpa) of natural gas. |
• | Corpus Christi Stage 3—FTA countries for a 20-year term in an amount equivalent to 514 Bcf/yr (approximately 10 mtpa) of natural gas (the “Stage 3 FTA”). The application for authorization to export that same 514 Bcf/yr of domestically produced LNG by vessel to non-FTA countries is currently pending before the DOE (the “Stage 3 Non-FTA”). |
In each case, the terms of these authorizations begin on the earlier of the date of first export thereunder or the date specified in the particular order, which ranges from seven to 10 years from the date the order was issued.
In June 2018, we requested that DOE vacate the Stage 3 FTA and permit us to withdraw the pending Stage 3 Non-FTA. These requests were made due to certain changes to Corpus Christi Stage 3.
In conjunction with the submission in June 2018 of our FERC application for Corpus Christi Stage 3, we submitted a new application for long-term multi-contract authorization to export up to a combined total of 582.14 Bcf/yr (approximately 11.45 mtpa) of natural gas to FTA countries for a 25-year term and to non-FTA countries for a 20-year term. The term of each authorization is expected to begin on the earlier of the date of first commercial export of LNG produced by Corpus Christi Stage 3 or the date which is seven years from the issuance of such authorizations.
Customers
CCL has entered into fixed price SPAs generally with terms of 20 years (plus extension rights) with nine third parties for Trains 1 through 3 of the CCL Project. Under these SPAs, the customers will purchase LNG from CCL for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG equal to approximately 115% of Henry Hub. In certain circumstances, the customers may elect to cancel or suspend deliveries of LNG cargoes, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. We refer to the fee component that is applicable regardless of a cancellation or suspension of LNG cargo deliveries under the SPAs as the fixed fee component of the price under our SPAs. We refer to the fee component that is applicable only in connection with LNG cargo deliveries as the variable fee component of the price under our SPAs. The variable fee under CCL’s SPAs entered into in connection with the development of the CCL Project was sized at the time of entry into each SPA with the intent to cover the costs of gas purchases and transportation related to, and operating and maintenance costs to produce, the LNG to be sold under each such SPA. The SPAs and contracted
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volumes to be made available under the SPAs are not tied to a specific Train; however, the term of each SPA generally commences upon the date of first commercial delivery for the applicable Train, as specified in each SPA.
In aggregate, the minimum fixed fee portion to be paid by the third-party SPA customers is approximately $550 million for Train 1, increasing to approximately $1.4 billion upon the date of first commercial delivery for Train 2 and further increasing to approximately $1.8 billion following the substantial completion of Train 3 of the CCL Project.
In addition, Cheniere Marketing has entered into SPAs with CCL to purchase 15 TBtu per annum of LNG and any LNG produced by CCL in excess of that required for other customers at Cheniere Marketing’s option.
Natural Gas Transportation, Storage and Supply
To ensure CCL is able to transport adequate natural gas feedstock to the Corpus Christi LNG terminal, it has entered into transportation precedent agreements to secure firm pipeline transportation capacity with CCP and certain third-party pipeline companies. CCL has entered into a firm storage services agreement with a third party to assist in managing variability in natural gas needs for the CCL Project. CCL has also entered into enabling agreements and long-term natural gas supply contracts with third parties, and will continue to enter into such agreements, in order to secure natural gas feedstock for the CCL Project. As of September 30, 2019, CCL had secured up to approximately 3,065 TBtu of natural gas feedstock through long-term natural gas supply contracts that range up to eight years, a portion of which is subject to the achievement of certain project milestones and other conditions precedent.
CCL Stage III has also entered into long-term natural gas supply contracts with third parties, and will continue to enter into such agreements, in order to secure natural gas feedstock for Corpus Christi Stage 3. As of September 30, 2019, CCL Stage III had secured up to approximately 2,361 TBtu of natural gas feedstock through long-term natural gas supply contracts that range up to approximately 15 years.
Construction
CCL entered into separate lump sum turnkey contracts with Bechtel for the engineering, procurement and construction of Stages 1 and 2 of the CCL Project under which Bechtel charges a lump sum for all work performed and generally bears project cost risk unless certain specified events occur, in which case Bechtel may cause CCL to enter into a change order, or CCL agrees with Bechtel to a change order.
The total contract price of the EPC contract for Stage 2 is approximately $2.4 billion, reflecting amounts incurred under change orders through September 30, 2019. Total expected capital costs for Trains 1 through 3 are estimated to be between $11.0 billion and $12.0 billion before financing costs and between $15.0 billion and $16.0 billion after financing costs including, in each case, estimated owner’s costs and contingencies.
Pipeline Facilities
In December 2014, the FERC issued a certificate of public convenience and necessity under Section 7(c) of the Natural Gas Act of 1938, as amended, authorizing CCP to construct and operate the Corpus Christi Pipeline. The Corpus Christi Pipeline is designed to transport 2.25 Bcf/d of natural gas feedstock required by the CCL Project from the existing regional natural gas pipeline grid. The construction of the Corpus Christi Pipeline was completed in the second quarter of 2018.
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Capital Resources
The CCH Group expects to finance the construction costs of the CCL Project from one or more of the following: operating cash flows from CCL and CCP and equity contributions from Cheniere. We realized offsets to LNG terminal costs of $99 million and $227 million in the three and nine months ended September 30, 2019, respectively, that were related to the sale of commissioning cargoes because these amounts were earned or loaded prior to the start of commercial operations of Trains 1 and 2 during the testing phase for their construction. The following table provides a summary of the capital resources of the CCH Group from borrowings and available commitments for the CCL Project, excluding equity contributions from Cheniere, at September 30, 2019 and December 31, 2018 (in millions):
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Senior notes (1) | $ | 4,977 | $ | 4,250 | ||||
11.0% Convertible Senior Secured Notes due 2025 (2) | 1,000 | 1,000 | ||||||
Credit facilities outstanding balance (3) | 5,341 | 5,324 | ||||||
Letters of credit issued (3) | 583 | 316 | ||||||
Available commitments under credit facilities (3) | 617 | 1,698 | ||||||
Total capital resources from borrowings and available commitments (4) | $ | 12,518 | $ | 12,588 |
(1) | Includes CCH’s 7.000% Senior Secured Notes due 2024 (the “2024 CCH Senior Notes”), 5.875% Senior Secured Notes due 2025 (the “2025 CCH Senior Notes”), 5.125% Senior Secured Notes due 2027 (the “2027 CCH Senior Notes”) and 4.80% Senior Secured Notes due 2039 (the “4.80% CCH Senior Notes”) (collectively, the “CCH Senior Notes”). |
(2) | Aggregate original principal amount before debt discount and debt issuance costs. |
(3) | Includes CCH Credit Facility and CCH Working Capital Facility. |
(4) | Does not include Cheniere’s additional borrowings from 2021 Cheniere Convertible Unsecured Notes, 2045 Cheniere Convertible Senior Notes and Cheniere Revolving Credit Facility, which may be used for the CCL Project. |
For additional information regarding our debt agreements related to the CCL Project, see Note 10—Debt of our Notes to Consolidated Financial Statements in this quarterly report and Note 12—Debt of our Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2018.
2025 CCH HoldCo II Convertible Senior Notes
In May 2015, CCH HoldCo II issued $1.0 billion aggregate principal amount of 11.0% Convertible Senior Secured Notes due 2025 (the “2025 CCH HoldCo II Convertible Senior Notes”) on a private placement basis. The 2025 CCH HoldCo II Convertible Senior Notes are convertible at the option of CCH HoldCo II or the holders, provided that various conditions are met. CCH HoldCo II is restricted from making distributions to Cheniere under agreements governing its indebtedness generally until, among other requirements, Trains 1 and 2 of the CCL Project are in commercial operation and a historical debt service coverage ratio and a projected fixed debt service coverage ratio of 1.20:1.00 are achieved.
In May 2018, the amended and restated note purchase agreement under which the 2025 CCH HoldCo II Convertible Senior Notes were issued was subsequently amended in connection with commercialization and financing of Train 3 of the CCL Project and to provide the note holders with certain prepayment rights related thereto consistent with those under the CCH Credit Facility. All terms of the 2025 CCH HoldCo II Convertible Senior Notes substantially remained unchanged.
CCH Senior Notes
In September 2019, CCH issued on a private placement basis, an aggregate of $727 million of the 4.80% CCH Senior Notes, in addition to the existing 2024 CCH Senior Notes, 2025 CCH Senior Notes and 2027 CCH Senior Notes. The 4.80% CCH Senior Notes were issued under an indenture dated as of September 27, 2019 (the “2019 CCH Indenture”), pursuant to the CCH Note Purchase Agreement with the purchasers party thereto and Allianz Global Investors GmbH, as noteholder consultant, originally entered into in June 2019. The CCH Senior Notes are jointly and severally guaranteed by CCH’s subsidiaries, CCL, CCP and Corpus Christi Pipeline GP, LLC (each a “CCH Guarantor” and collectively, the “CCH Guarantors”).
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The 4.80% CCH Senior Notes are CCH’s senior secured obligation, ranking senior in right of payment to any and all of CCH’s future indebtedness that is subordinated to the 4.80% CCH Senior Notes and equal in right of payment with CCH’s other existing and future indebtedness that is senior and secured by the same collateral securing the 4.80% CCH Senior Notes. The 4.80% CCH Senior Notes are secured by a first-priority security interest in substantially all of CCH’s and the CCH Guarantors’ assets.
Both the 2019 CCH Indenture governing the 4.80% CCH Senior Notes and the indenture governing the 2024 CCH Senior Notes, 2025 CCH Senior Notes, and 2027 CCH Senior Notes (the “CCH Indenture”) contain customary terms and events of default and certain covenants that, among other things, limit CCH’s ability and the ability of CCH’s restricted subsidiaries to: incur additional indebtedness or issue preferred stock; make certain investments or pay dividends or distributions on membership interests or subordinated indebtedness or purchase, redeem or retire membership interests; sell or transfer assets, including membership or partnership interests of CCH’s restricted subsidiaries; restrict dividends or other payments by restricted subsidiaries to CCH or any of CCH’s restricted subsidiaries; incur liens; enter into transactions with affiliates; dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of the properties or assets of CCH and its restricted subsidiaries taken as a whole; or permit any CCH Guarantor to dissolve, liquidate, consolidate, merge, sell or lease all or substantially all of its properties and assets. The 2019 CCH Indenture covenants are subject to a number of important limitations and exceptions.
At any time prior to six months before the respective dates of maturity for each of the CCH Senior Notes, CCH may redeem all or part of such series of the CCH Senior Notes at a redemption price equal to the “make-whole” price set forth in the CCH Indenture, plus accrued and unpaid interest, if any, to the date of redemption. At any time within six months of the respective dates of maturity for each of the CCH Senior Notes, CCH may redeem all or part of such series of the CCH Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the CCH Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.
CCH Credit Facility
In May 2018, CCH amended and restated the CCH Credit Facility to increase total commitments under the CCH Credit Facility from $4.6 billion to $6.1 billion. The obligations of CCH under the CCH Credit Facility are secured by a first priority lien on substantially all of the assets of CCH and its subsidiaries and by a pledge by CCH HoldCo I of its limited liability company interests in CCH. As of September 30, 2019 and December 31, 2018, CCH had zero and $1.0 billion of available commitments and $5.3 billion and $5.2 billion of loans outstanding under the CCH Credit Facility, respectively. As part of the capital allocation framework announced in June 2019, we prepaid $70 million of outstanding borrowings under the CCH Credit Facility during the three and nine months ended September 30, 2019.
The CCH Credit Facility matures on June 30, 2024, with principal payments due quarterly commencing on the earlier of (1) the first quarterly payment date occurring more than three calendar months following the completion of the CCL Project as defined in the common terms agreement and (2) a set date determined by reference to the date under which a certain LNG buyer linked to the last Train of the CCL Project to become operational is entitled to terminate its SPA for failure to achieve the date of first commercial delivery for that agreement. Scheduled repayments will be based upon a 19-year tailored amortization, commencing the first full quarter after the completion of Trains 1 through 3 and designed to achieve a minimum projected fixed debt service coverage ratio of 1.50:1.
Under the CCH Credit Facility, CCH is required to hedge not less than 65% of the variable interest rate exposure of its senior secured debt. CCH is restricted from making certain distributions under agreements governing its indebtedness generally until, among other requirements, the completion of the construction of Trains 1 through 3 of the CCL Project, funding of a debt service reserve account equal to six months of debt service and achieving a historical debt service coverage ratio and fixed projected debt service coverage ratio of at least 1.25:1.00.
CCH Working Capital Facility
In June 2018, CCH amended and restated the CCH Working Capital Facility to increase total commitments under the CCH Working Capital Facility from $350 million to $1.2 billion. The CCH Working Capital Facility is intended to be used for loans to CCH (“CCH Working Capital Loans”) and the issuance of letters of credit on behalf of CCH for certain working capital requirements related to developing and operating the CCL Project and for related business purposes. Loans under the CCH Working Capital Facility are guaranteed by the CCH Guarantors. CCH may, from time to time, request increases in the commitments under the CCH Working Capital Facility of up to the maximum allowed for working capital under the Common Terms Agreement that
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was entered into concurrently with the CCH Credit Facility. As of September 30, 2019 and December 31, 2018, CCH had $617 million and $716 million of available commitments, $583 million and $316 million aggregate amount of issued letters of credit and zero and $168 million of loans outstanding under the CCH Working Capital Facility, respectively.
The CCH Working Capital Facility matures on June 29, 2023, and CCH may prepay the CCH Working Capital Loans and loans made in connection with a draw upon any letter of credit (“CCH LC Loans”) at any time without premium or penalty upon three business days’ notice and may re-borrow at any time. CCH LC Loans have a term of up to one year. CCH is required to reduce the aggregate outstanding principal amount of all CCH Working Capital Loans to zero for a period of five consecutive business days at least once each year.
The CCH Working Capital Facility contains conditions precedent for extensions of credit, as well as customary affirmative and negative covenants. The obligations of CCH under the CCH Working Capital Facility are secured by substantially all of the assets of CCH and the CCH Guarantors as well as all of the membership interests in CCH and each of the CCH Guarantors on a pari passu basis with the CCH Senior Notes and the CCH Credit Facility.
Restrictive Debt Covenants
As of September 30, 2019, each of our issuers was in compliance with all covenants related to their respective debt agreements.
Marketing
We market and sell LNG produced by the Liquefaction Projects that is not required for other customers through our integrated marketing function. We are developing a portfolio of long-, medium- and short-term SPAs to transport and unload commercial LNG cargoes to locations worldwide, which is primarily sourced by LNG produced by the Liquefaction Projects but supplemented by volume procured from other locations worldwide, as needed. As of September 30, 2019, we have sold or have options to sell approximately 3,380 TBtu of LNG to be delivered to customers between 2019 and 2045, excluding volume for agreements anticipated to be assigned to SPL in the future. The cargoes have been sold either on a free on board (“FOB”) basis (delivered to the customer at the Sabine Pass LNG terminal or the Corpus Christi LNG terminal) or a delivered at terminal (“DAT”) basis (delivered to the customer at their LNG receiving terminal). We have chartered LNG vessels to be utilized in DAT transactions. In addition, we have entered into a long-term agreement to sell LNG cargoes on a DAT basis that is conditioned upon the buyer achieving certain milestones.
Cheniere Marketing entered into uncommitted trade finance facilities with available commitments of $420 million as of September 30, 2019, primarily to be used for the purchase and sale of LNG for ultimate resale in the course of its operations. The finance facilities are intended to be used for advances, guarantees or the issuance of letters of credit or standby letters of credit on behalf of Cheniere Marketing. As of September 30, 2019 and December 31, 2018, Cheniere Marketing had $32 million and $31 million, respectively, in standby letters of credit and guarantees outstanding under the finance facilities. As of September 30, 2019 and December 31, 2018, Cheniere Marketing had $11 million and $71 million, respectively, in loans outstanding under the finance facilities. Cheniere Marketing pays interest or fees on utilized commitments.
Corporate and Other Activities
We are required to maintain corporate and general and administrative functions to serve our business activities described above. We are also in various stages of developing other projects, including infrastructure projects in support of natural gas supply and LNG demand, which, among other things, will require acceptable commercial and financing arrangements before we make an FID. We have made an equity investment in Midship Pipeline, which is constructing a pipeline with expected capacity of up to 1.44 million Dekatherms per day that will connect new gas production in the Anadarko Basin to Gulf Coast markets, including markets serving the Liquefaction Projects.
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Sources and Uses of Cash
The following table summarizes the sources and uses of our cash, cash equivalents and restricted cash for the nine months ended September 30, 2019 and 2018 (in millions). The table presents capital expenditures on a cash basis; therefore, these amounts differ from the amounts of capital expenditures, including accruals, which are referred to elsewhere in this report. Additional discussion of these items follows the table.
Nine Months Ended September 30, | |||||||
2019 | 2018 | ||||||
Operating cash flows | $ | 1,092 | $ | 1,504 | |||
Investing cash flows | (2,658 | ) | (2,722 | ) | |||
Financing cash flows | 1,527 | 1,537 | |||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (39 | ) | 319 | ||||
Cash, cash equivalents and restricted cash—beginning of period | 3,156 | 2,613 | |||||
Cash, cash equivalents and restricted cash—end of period | $ | 3,117 | $ | 2,932 |
Operating Cash Flows
Our operating cash net inflows during the nine months ended September 30, 2019 and 2018 were $1,092 million and $1,504 million, respectively. The $412 million decrease in operating cash inflows in 2019 compared to 2018 was primarily related to increased operating costs and expenses, which were partially offset by increased cash receipts from the sale of LNG cargoes, as a result of the additional Trains that were operating at the Liquefaction Projects in 2019. In addition to Trains 1 through 4 of the SPL Project that were operational during both the nine months ended September 30, 2019 and 2018, Train 5 of the SPL Project and Train 1 of the CCL Project were operational for approximately seven months during the nine months ended September 30, 2019 and Train 2 of the CCL Project was operational for approximately one month during the nine months ended September 30, 2019.
Investing Cash Flows
Investing cash net outflows during the nine months ended September 30, 2019 and 2018 were $2,658 million and $2,722 million, respectively, and were primarily used to fund the construction costs for the Liquefaction Projects. These costs are capitalized as construction-in-process until achievement of substantial completion. Additionally, we invested $70 million in Midship Holdings, our equity method investment, during the nine months ended September 30, 2019.
Financing Cash Flows
Financing cash net inflows during the nine months ended September 30, 2019 were $1,527 million, primarily as a result of:
• | issuance of an aggregate principal amount of $1.5 billion of the 2029 CQP Senior Notes, which was used to prepay the outstanding balance of the term loan under the 2019 CQP Credit Facilities; |
• | $982 million of borrowings and $797 million of repayments under the CCH Credit Facility; |
• | $730 million of borrowings and repayments under the 2019 CQP Credit Facilities; |
• | issuance of an aggregate principal of $727 million of the 4.80% CCH Senior Notes, which was used to prepay a portion of the outstanding balance of the CCH Credit Facility; |
• | $481 million of borrowings and $649 million in repayments under the CCH Working Capital Facility; |
• | $439 million of distributions to non-controlling interest by Cheniere Partners; |
• | $159 million paid to repurchase our common stock under the share repurchase program; |
• | $61 million of net repayments related to our Cheniere Marketing trade financing facilities; |
• | $38 million of debt issuance costs primarily related to up-front fees paid upon the closing of the 2019 CQP Credit Facilities, 2029 CQP Senior Notes and the 4.80% CCH Senior Notes; and |
• | $19 million paid for tax withholdings for share-based compensation. |
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Financing cash net inflows during the nine months ended September 30, 2018 were $1,537 million, primarily as a result of:
• | issuance of an aggregate principal amount of $1.1 billion of the 2026 CQP Senior Notes, which was used to prepay $1.1 billion of the outstanding borrowings under the 2016 CQP Credit Facilities; |
• | $2.3 billion of borrowings and $281 million in repayments under the CCH Credit Facility; |
• | $14 million of borrowings and $14 million in repayments under the CCH Working Capital Facility; |
• | $66 million of net borrowings related to our Cheniere Marketing trade financing facilities; |
• | $53 million of debt issuance costs related to up-front fees paid for the amendment and restatement of the CCH Credit Facility and the CCH Working Capital Facility and upon the issuance of the 2026 CQP Senior Notes; |
• | $16 million in debt extinguishment costs related to the prepayments of the 2016 CQP Credit Facilities and the CCH Credit Facility; |
• | $435 million of distributions and dividends to non-controlling interest by Cheniere Partners and Cheniere Holdings; |
• | $10 million paid for tax withholdings for share-based compensation; and |
• | $7 million of transaction costs to acquire additional interests in Cheniere Holdings. |
Results of Operations
The following table summarizes the volumes of operational and commissioning LNG cargoes that were loaded from the Liquefaction Projects, which were recognized on our Consolidated Financial Statements during the three and nine months ended September 30, 2019:
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | ||||||||||
(in TBtu) | Operational | Commissioning | Operational | Commissioning | |||||||
Volumes loaded during the current period | 364 | 20 | 1,009 | 48 | |||||||
Volumes loaded during the prior period but recognized during the current period | 36 | 3 | 25 | 3 | |||||||
Less: volumes loaded during the current period and in transit at the end of the period | (36 | ) | — | (36 | ) | — | |||||
Total volumes recognized in the current period | 364 | 23 | 998 | 51 |
Our consolidated net loss attributable to common stockholders was $318 million, or $1.25 per share (basic and diluted), in the three months ended September 30, 2019, compared to net income attributable to common stockholders of $65 million, or $0.26 per share (basic and diluted), in the three months ended September 30, 2018. This $383 million increase in net loss attributable to common stockholders in 2019 was primarily attributable to increased interest expense, net of amounts capitalized, increased operating and maintenance expense, increased loss on equity method investments, increased derivative loss, net, and increased depreciation and amortization expense, which were partially offset by increased margins due to increased volume partially offset by decreased pricing on LNG, and decreased net income attributable to non-controlling interest.
Our consolidated net loss attributable to common stockholders was $291 million, or $1.13 (basic and diluted), in the nine months ended September 30, 2019, compared to net income attributable to common stockholders of $404 million, or $1.67 per share—basic and $1.65 per share—diluted, in the nine months ended September 30, 2018. This $695 million increase in net loss attributable to common stockholders in 2019 was primarily attributable to increased operating and maintenance expense, increased interest expense, net of amounts capitalized, increased derivative loss, net, increased depreciation and amortization expense and increased loss on equity method investments, which were partially offset by increased margins due to increased volume partially offset by decreased pricing on LNG, and decreased net income attributable to non-controlling interest.
We enter into derivative instruments to manage our exposure to (1) changing interest rates, (2) commodity-related marketing and price risks and (3) foreign exchange volatility. Derivative instruments are reported at fair value on our Consolidated Financial Statements. In some cases, the underlying transactions economically hedged receive accrual accounting treatment, whereby revenues and expenses are recognized only upon delivery, receipt or realization of the underlying transaction. Because the recognition of derivative instruments at fair value has the effect of recognizing gains or losses relating to future period exposure,
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use of derivative instruments may increase the volatility of our results of operations based on changes in market pricing, counterparty credit risk and other relevant factors.
Revenues
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||
LNG revenues | $ | 2,059 | $ | 1,719 | $ | 340 | $ | 6,375 | $ | 5,327 | $ | 1,048 | |||||||||||
Regasification revenues | 66 | 66 | — | 199 | 196 | 3 | |||||||||||||||||
Other revenues | 45 | 34 | 11 | 149 | 81 | 68 | |||||||||||||||||
Total revenues | $ | 2,170 | $ | 1,819 | $ | 351 | $ | 6,723 | $ | 5,604 | $ | 1,119 |
We begin recognizing LNG revenues from the Liquefaction Projects following the substantial completion and the commencement of operating activities of the respective Trains. In addition to Trains 1 through 4 of the SPL Project that were operational during both the nine months ended September 30, 2019 and 2018, Train 5 of the SPL Project and Train 1 of the CCL Project were operational for approximately seven months during the nine months ended September 30, 2019 and Train 2 of the CCL Project was operational for approximately one month during the nine months ended September 30, 2019. The additional revenue from the increased volume of LNG sold following the achievement of substantial completion of these Trains in the three and nine months ended September 30, 2019 from the comparable periods in 2018 was partially offset by decreased revenues per MMBtu, which was primarily affected by sales made at current market prices by our integrated marketing function. We expect our LNG revenues to increase in the future upon Train 6 of the SPL Project and Train 3 of the CCL Project becoming operational.
Prior to substantial completion of a Train, amounts received from the sale of commissioning cargoes from that Train are offset against LNG terminal construction-in-process, because these amounts are earned or loaded during the testing phase for the construction of that Train. We realized offsets to LNG terminal costs of $99 million corresponding to 23 TBtu of LNG in the three months ended September 30, 2019 and $301 million corresponding to 51 TBtu of LNG in the nine months ended September 30, 2019 that related to the sale of commissioning cargoes from the Liquefaction Projects. We did not realize any offsets to LNG terminal costs in the three and nine months ended September 30, 2018.
Also included in LNG revenues are gains and losses from derivative instruments, which include the realized value associated with a portion of derivative instruments that settle through physical delivery and the sale of natural gas procured for the liquefaction process. During the three months ended September 30, 2019 and 2018, we realized $134 million and $13 million, respectively, of gains and other revenues from these transactions. During the nine months ended September 30, 2019 and 2018, we realized $451 million and $21 million, respectively, of gains and other revenues from these transactions.
The following table presents the components of LNG revenues and the corresponding LNG volumes sold:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
LNG revenues (in millions): | |||||||||||||||
LNG from the Liquefaction Projects sold under third party long-term agreements (1) | $ | 1,496 | $ | 1,182 | $ | 4,406 | $ | 3,293 | |||||||
LNG from the Liquefaction Projects sold by our integrated marketing function under short-term agreements | 398 | 316 | 1,303 | 1,619 | |||||||||||
LNG procured from third parties | 31 | 208 | 215 | 394 | |||||||||||
Other revenues and derivative gains (losses) | 134 | 13 | 451 | 21 | |||||||||||
Total LNG revenues | $ | 2,059 | $ | 1,719 | $ | 6,375 | $ | 5,327 | |||||||
Volumes sold as LNG revenues (in TBtu): | |||||||||||||||
LNG from the Liquefaction Projects sold under third party long-term agreements (1) | 276 | 196 | 753 | 550 | |||||||||||
LNG from the Liquefaction Projects sold by our integrated marketing function under short-term agreements | 88 | 32 | 245 | 181 | |||||||||||
LNG procured from third parties | 8 | 23 | 31 | 44 | |||||||||||
Total volumes sold as LNG revenues | 372 | 251 | 1,029 | 775 |
(1) Long-term agreements include agreements with tenure of 12 months or more.
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Operating costs and expenses
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||
Cost of sales | $ | 1,267 | $ | 1,027 | $ | 240 | $ | 3,758 | $ | 3,078 | $ | 680 | |||||||||||
Operating and maintenance expense | 308 | 170 | 138 | 824 | 457 | 367 | |||||||||||||||||
Development expense | 2 | 2 | — | 6 | 6 | — | |||||||||||||||||
Selling, general and administrative expense | 72 | 74 | (2 | ) | 222 | 214 | 8 | ||||||||||||||||
Depreciation and amortization expense | 213 | 113 | 100 | 561 | 333 | 228 | |||||||||||||||||
Impairment expense and loss on disposal of assets | 1 | 8 | (7 | ) | 7 | 8 | (1 | ) | |||||||||||||||
Total operating costs and expenses | $ | 1,863 | $ | 1,394 | $ | 469 | $ | 5,378 | $ | 4,096 | $ | 1,282 |
Our total operating costs and expenses increased during the three and nine months ended September 30, 2019 from the three and nine months ended September 30, 2018, primarily as a result of the increase in operating Trains between each of the periods and increased third-party service and maintenance costs from additional maintenance and related activities at the SPL Project.
Cost of sales includes costs incurred directly for the production and delivery of LNG from the Liquefaction Projects, to the extent those costs are not utilized for the commissioning process. Cost of sales increased during the three months ended September 30, 2019 from the three months ended September 30, 2018 due to a decrease in fair value of the derivatives associated with hedges to secure natural gas feedstock for the Liquefaction Projects and Corpus Christi Stage 3 primarily due to unfavorable shifts in the long-term forward prices, increased vessel charter costs and increased cost of natural gas feedstock for our LNG sales, which resulted from increased volumes as a result of substantial completion of Train 5 of the SPL Project and Trains 1 and 2 of the CCL Project but was partially offset by decreased pricing of natural gas feedstock. Partially offsetting these increases was a decrease in costs associated with a portion of derivative instruments that settle through physical delivery. Cost of sales increased during the nine months ended September 30, 2019 from the nine months ended September 30, 2018 due to increased cost of natural gas feedstock for our LNG sales from increased volumes partially offset by decreased pricing of natural gas feedstock, increased vessel charter costs and an increase in costs associated with a portion of derivative instruments that settle through physical delivery. Cost of sales also includes port and canal fees, variable transportation and storage costs, costs associated with a portion of derivative instruments that settle through physical delivery and the sale of natural gas procured for the liquefaction process and other costs to convert natural gas into LNG.
Operating and maintenance expense primarily includes costs associated with operating and maintaining the Liquefaction Projects. The increase in operating and maintenance expense during the three and nine months ended September 30, 2019 from the three and nine months ended September 30, 2018 was primarily related to: (1) increased natural gas transportation and storage capacity demand charges from operating Train 5 of the SPL Project and Trains 1 and 2 of the CCL Project following the respective substantial completions, (2) increased cost of turnaround and related activities at the SPL Project, (3) increased TUA reservation charges paid to Total from payments under the partial TUA assignment agreement and (4) increased payroll and benefit costs from increased headcount to operate Train 5 of the SPL Project and Trains 1 and 2 of the CCL Project. Operating and maintenance expense also includes insurance and regulatory costs and other operating costs.
Depreciation and amortization expense increased during the three and nine months ended September 30, 2019 from the three and nine months ended September 30, 2018 as a result of commencing operations of Train 5 of the SPL Project in March 2019 and Trains 1 and 2 of the CCL Project in February 2019 and August 2019, respectively, and completing construction of the Corpus Christi Pipeline in the second quarter of 2018, as the related assets began depreciating upon reaching substantial completion.
We expect our operating costs and expenses to generally increase in the future upon Train 6 of the SPL Project and Train 3 of the CCL Project achieving substantial completion, although we expect certain costs will not proportionally increase with the number of operational Trains as cost efficiencies will be realized.
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Other expense (income)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||
Interest expense, net of capitalized interest | $ | 395 | $ | 221 | $ | 174 | $ | 1,014 | $ | 653 | $ | 361 | |||||||||||
Loss on modification or extinguishment of debt | 27 | 12 | 15 | 27 | 27 | — | |||||||||||||||||
Derivative loss (gain), net | 78 | (23 | ) | 101 | 187 | (132 | ) | 319 | |||||||||||||||
Other expense (income) | 70 | (15 | ) | 85 | 38 | (32 | ) | 70 | |||||||||||||||
Total other expense | $ | 570 | $ | 195 | $ | 375 | $ | 1,266 | $ | 516 | $ | 750 |
Interest expense, net of capitalized interest, increased during the three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018, as a result of increased outstanding debt (before unamortized premium, discount and debt issuance costs, net) from $28.3 billion as of September 30, 2018 to $31.5 billion as of September 30, 2019, primarily due to increased borrowings under the CCH Credit Facility and the issuance of the 2029 CQP Senior Notes, as well as a decrease in the portion of total interest costs that could be capitalized as additional Trains of the Liquefaction Projects completed construction between the periods. For the three months ended September 30, 2019 and 2018, we incurred $468 million and $426 million of total interest cost, respectively, of which we capitalized $73 million and $205 million, respectively, which was primarily related to the construction of the Liquefaction Projects. For the nine months ended September 30, 2019 and 2018, we incurred $1.4 billion and $1.2 billion of total interest cost, respectively, of which we capitalized $360 million and $589 million, respectively, which was primarily related to the construction of the Liquefaction Projects.
Loss on modification or extinguishment of debt increased during the three months ended September 30, 2019 from the three months ended September 30, 2018. The loss on modification or extinguishment of debt recognized in 2019 of $27 million was related to the termination of $750 million of commitments under the 2019 CQP Credit Facilities in connection with the 2029 CQP Senior Notes and the prepayment of a portion of the outstanding balance of the CCH Credit Facility in connection with the 4.80% CCH Senior Notes and as part of the capital allocation framework. Loss on modification or extinguishment of debt recognized in 2018 was attributable to the incurrence of third party fees and write off of unamortized debt issuance costs in September 2018 as a result of the termination of approximately $1.2 billion of commitments under the 2016 CQP Credit Facilities in connection with the issuance of the 2026 CQP Senior Notes.
Derivative loss, net increased during the three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018, primarily due to an unfavorable shift in the long-term forward LIBOR curve between the periods.
Other expense increased during the three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018, primarily due to a loss on our equity method investments, which was partially offset by an increase in interest income earned on our cash and cash equivalents. During the three and nine months ended September 30, 2019, we recognized impairment losses of $87 million relating to our investments in certain equity method investees, including Midship Holdings. Impairments were precipitated primarily by cost overruns and extended construction timelines for operating infrastructure of our investees’ projects, resulting in a reduction of the expected fair value of our equity interests.
Income tax benefit (provision)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||
Income (loss) before income taxes and non-controlling interest | $ | (263 | ) | $ | 230 | $ | (493 | ) | $ | 79 | $ | 992 | $ | (913 | ) | ||||||||
Income tax benefit (provision) | 3 | (3 | ) | 6 | — | (15 | ) | 15 | |||||||||||||||
Effective tax rate | 1.1 | % | 1.3 | % | — | % | 1.5 | % |
Income tax benefit increased $6 million during the three months ended September 30, 2019 and income tax provision decreased $15 million during the nine months ended September 30, 2019, respectively, from the comparable periods in 2018 primarily attributable to changes in the income earned and tax transfer pricing applied to our U.K. integrated marketing function. The effective tax rates during each of the three and nine months ended September 30, 2019 and 2018 were lower than the 21%
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federal statutory rate, primarily as a result of maintaining a valuation allowance against our federal and state net deferred tax assets. Given our current and anticipated future earnings, coupled with additional positive evidence achieved during the three months ended September 30, 2019 such as substantial completion of Train 2 of the CCL Project, we believe that there is a reasonable possibility that a full release of the federal valuation allowance and a partial release of the state valuation allowance could occur as early as the fourth quarter of 2019. The release of the valuation allowance would result in the recognition of certain deferred tax assets and a non-cash income tax benefit in the period the release is recorded.
Net income attributable to non-controlling interest
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||
Net income attributable to non-controlling interest | $ | 58 | $ | 162 | $ | (104 | ) | $ | 370 | $ | 573 | $ | (203 | ) |
Net income attributable to non-controlling interest decreased during the three and nine months ended September 30, 2019 from the three and nine months ended September 30, 2018 due to the decrease of non-controlling interest as a result of our merger with Cheniere Holdings in September 2018, in which all publicly-held shares of Cheniere Holdings were canceled and the non-controlling interest in Cheniere Holdings was reduced to zero. Net income attributable to non-controlling interest also decreased during the three months ended September 30, 2019 from the three months ended September 30, 2018 due to the decrease in consolidated net income recognized by Cheniere Partners in which the non-controlling interests are held. The consolidated net income recognized by Cheniere Partners decreased from $307 million in the three months ended September 30, 2018 to $110 million in the three months ended September 30, 2019 and from $923 million in the nine months ended September 30, 2018 to $727 million in the nine months ended September 30, 2019 primarily due a decrease in income from operations from higher operating and maintenance expense and an increase in interest expense, net of capitalized interest, as a result of the decrease in the portion of total interest costs that could be capitalized as Train 5 of the SPL Project completed construction between the periods.
Off-Balance Sheet Arrangements
As of September 30, 2019, we had no transactions that met the definition of off-balance sheet arrangements that may have a current or future material effect on our consolidated financial position or operating results.
Summary of Critical Accounting Estimates
The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the year ended December 31, 2018.
Recent Accounting Standards
For descriptions of recently issued accounting standards, see Note 1—Nature of Operations and Basis of Presentation of our Notes to Consolidated Financial Statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Cash Investments
We have cash investments that we manage based on internal investment guidelines that emphasize liquidity and preservation of capital. Such cash investments are stated at historical cost, which approximates fair market value on our Consolidated Balance Sheets.
Marketing and Trading Commodity Price Risk
We have entered into commodity derivatives consisting of natural gas supply contracts for the commissioning and operation of the SPL Project, the CCL Project and potential future development of Corpus Christi Stage 3 (“Liquefaction Supply Derivatives”). We have also entered into financial derivatives to hedge the exposure to the commodity markets in which we have contractual
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arrangements to purchase or sell physical LNG (“LNG Trading Derivatives”). In order to test the sensitivity of the fair value of the Liquefaction Supply Derivatives and the LNG Trading Derivatives to changes in underlying commodity prices, management modeled a 10% change in the commodity price for natural gas for each delivery location and a 10% change in the commodity price for LNG, respectively, as follows (in millions):
September 30, 2019 | December 31, 2018 | ||||||||||||||
Fair Value | Change in Fair Value | Fair Value | Change in Fair Value | ||||||||||||
Liquefaction Supply Derivatives | $ | (52 | ) | $ | 203 | $ | (42 | ) | $ | 6 | |||||
LNG Trading Derivatives | 24 | 27 | (24 | ) | 9 |
Interest Rate Risk
We are exposed to interest rate risk primarily when we incur debt related to project financing. Interest rate risk is managed in part by replacing outstanding floating-rate debt with fixed-rate debt with varying maturities. CCH has entered into interest rate swaps to hedge the exposure to volatility in a portion of the floating-rate interest payments under the CCH Credit Facility (“CCH Interest Rate Derivatives”) and to hedge against changes in interest rates that could impact anticipated future issuance of debt by CCH (“CCH Interest Rate Forward Start Derivatives”). In order to test the sensitivity of the fair value of the CCH Interest Rate Derivatives to changes in interest rates, management modeled a 10% change in the forward one-month LIBOR curve across the remaining terms of the CCH Interest Rate Derivatives and CCH Interest Rate Forward Start Derivatives as follows (in millions):
September 30, 2019 | December 31, 2018 | ||||||||||||||
Fair Value | Change in Fair Value | Fair Value | Change in Fair Value | ||||||||||||
CCH Interest Rate Derivatives | $ | (104 | ) | $ | 20 | $ | 18 | $ | 37 | ||||||
CCH Interest Rate Forward Start Derivatives | (68 | ) | 30 | — | — |
Foreign Currency Exchange Risk
We have entered into foreign currency exchange (“FX”) contracts to hedge exposure to currency risk associated with operations in countries outside of the United States (“FX Derivatives”). In order to test the sensitivity of the fair value of the FX Derivatives to changes in FX rates, management modeled a 10% change in FX rate between the U.S. dollar and the applicable foreign currencies as follows (in millions):
September 30, 2019 | December 31, 2018 | ||||||||||||||
Fair Value | Change in Fair Value | Fair Value | Change in Fair Value | ||||||||||||
FX Derivatives | $ | 37 | $ | 4 | $ | 15 | $ | 1 |
ITEM 4. | CONTROLS AND PROCEDURES |
We maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports filed by us under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As of the end of the period covered by this report, we evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective.
During the most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We may in the future be involved as a party to various legal proceedings, which are incidental to the ordinary course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters. There have been no material changes to the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 and in our Quarterly Report on Form 10-Q for the period ended June 30, 2019.
ITEM 1A. | RISK FACTORS |
There have been no material changes from the risk factors disclosed in our annual report on Form 10-K for the year ended December 31, 2018.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
The following table summarizes stock repurchases for the three months ended September 30, 2019:
Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share (2) | Total Number of Shares Purchased as a Part of Publicly Announced Plans | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans (3) | ||||
July 1 - 31, 2019 | 584,171 | $67.22 | 520,460 | $962,086,617 | ||||
August 1 - 31, 2019 | 1,651,673 | $61.99 | 1,647,438 | $859,955,793 | ||||
September 1 - 30, 2019 | 311,449 | $61.60 | 309,826 | $840,873,574 | ||||
Total | 2,547,293 | $63.14 | 2,477,724 |
(1) | Includes shares surrendered to us by participants in our share-based compensation plans for payment of applicable tax withholdings on the vesting of share-based compensation awards. Associated shares surrendered by participants are repurchased pursuant to terms of the plan and award agreements and not as part of the publicly announced share repurchase plan. |
(2) | The price paid per share was based on the average trading price of our common stock on the dates on which we repurchased the shares. |
(3) | On June 3, 2019, we announced that our Board authorized a 3-year, $1 billion share repurchase program. |
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ITEM 6. | EXHIBITS |
Exhibit No. | Description | |
1.1 | ||
4.1 | ||
4.2 | ||
4.3 | ||
10.1* | ||
10.2† | ||
10.3*† | ||
10.4* | ||
10.5* | ||
10.6 | ||
10.7* | ||
10.8* | ||
10.9* | ||
10.10* | ||
31.1* |
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Exhibit No. | Description | |
31.2* | ||
32.1** | ||
32.2** | ||
101.INS* | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith. |
** | Furnished herewith. |
† | Management contract or compensatory plan or arrangement. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHENIERE ENERGY, INC. | |||
Date: | October 31, 2019 | By: | /s/ Michael J. Wortley |
Michael J. Wortley | |||
Executive Vice President and Chief Financial Officer | |||
(on behalf of the registrant and as principal financial officer) | |||
Date: | October 31, 2019 | By: | /s/ Leonard E. Travis |
Leonard E. Travis | |||
Vice President and Chief Accounting Officer | |||
(on behalf of the registrant and as principal accounting officer) |
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